Locking the Loan
“Locking the Loan” is a temporary guarantee by lenders and mortgage brokers of an interest rate, a point spread, or the combination of both, for a mortgage loan.

In the past, when Locking a Loan, it was common practice for lenders and brokers to request a commitment in writing or a cash deposit by the potential mortgage loan purchaser as a way to protect the lender or broker from the chance of a loan applicant shopping and/or purchasing a loan elsewhere, at a better deal. It became apparent to these lenders and mortgage brokers that this practice of asking for this commitment often would push individuals toward other institutions that did not require a commitment, and therefore, this practice has mostly been dropped. Now, by saying they’ll “lock the loan”, lenders and mortgage brokers are assuming the risk of covering any additional increase in the mortgage interest rate that may come about over the lock period. To offset this potential loss, lenders and mortgage brokers will often add Points to the loan quote – more Points for longer lock periods and less Points for shorter. One particular piece of information that most mortgage brokers and lenders are not typically willing to offer up is that once a loan is locked, the borrower is not committed to accept the loan at the end of the lock period. For whatever reason the borrower decides not to take the mortgage loan – cold feet, lower interest rate elsewhere, etc – there is no obligation to assume the mortgage. In situations where lower interest rates may be available at the end of the lock period, many lenders and mortgage brokers will re-negotiate a mortgage loan interest rate and point spread in order to keep the transaction.



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We are not mortgage professionals nor do we claim to be. All information on this site is provided for informational purposes only. Individuals should always consult a real estate attorney prior to making any real estate commitments which they may not understand.