When is the right time to Lock a Mortgage Loan?

When your closing date is several weeks away, you may wish to ask your loan officer to lock your rate for a longer period of time. Lock periods up to 120 days or more are available on certain programs, but depending on the program may require a nominal upfront lock fee.

The most common lock period is the 30 day lock. The 30 day lock period gives the mortgage broker sufficient time to complete the mortgage loan. However a great benefit to using a mortgage broker over a bank is that id rates drop dramatically the broker can submit your loan to a new lender in minutes and secure you a lower rate.

If you lock your loan but do not close before the lock expires, you then are faced with worst-case pricing. If the rates have improved, you are stuck with the lock price, but if the rates have deteriorated, you are stuck with the present rate which would be worse than your rate-lock.

Why not just lock your interest rate in then for 120 days instead of 30 days to be safe from your rate going up you may ask? The answer is because the longer you lock your interest rate in for, the higher the interest rate gets. A longer lock is very risky to a bank, because they are guaranteeing that rate for an extended period of time and if rates get significantly worse, they could actually stand to lose money on the rate lock. Therefore, this is something to consider when deciding or working with your mortgage professional on locking in your rate.

The best question to ask yourself when you are considering locking a rate is: Do I really want to worry about interest rates every day, or can I live with the rate I have now? Rates can vary daily, no one can consistently predict the day-to-day fluctuations of interest rates.

The Importance of Paying Your Rent by Check - Many potential homeowners make a huge mistake by paying their monthly rental payment to their landlord by in cash. Why is this a mistake?

In some situations, lender can even count a 12 month rental history documented with cancelled checks as one of the qualifying tradelines. This is extremely important for borrowers with a thin credit profile or limited tradelines.

Many lenders will require 12 months cancelled checks to verify timely rent payments. If you only pay your rent with cash there will be no way to document a rent payment history. Some lenders will accept a VOR or Verification Of Rent that is filled out by your landlord. A VOR is basically a written rent history statement endorsed by the landlord.

Fannie Mae loans and FHA loans will accept a Verification of Rent(VOR) filled out by your landlord. Many other loans do not allow for VOR's. By having cancelled checks, you do not have to notify your landlord in advance of your intention to move due to having a VOR request done by a lender.

When paying your rent by check you also want to make sure that your landlord is cashing your checks when you give the landlord your check. When you need to use 12 months worth of cancelled checks to verify your rental payment history, not only will the underwriter look at when the check was dated, but he/she will also need to see the backside of the check to see when the check went through the bank. Anyone can date a check whatever date they want to on the front of a check and this won't prove that their payment was made on time. However, the back of the check will prove whether the payment was made on time or not. Therefore, if you have a landlord who does not cash your checks immediately, this could reflect poorly to demonstrate a good payment history and can possibly cause some problems with verifying your rent payments.