Home Mortgage Loan – What You Need to Know About Mortgage Rate Lock In

If you are in the process of applying for a new home mortgage loan, understanding how your mortgage company guarantees your interest rate will help you avoid overpaying for that loan. The interest rate guarantee you receive from your Mortgage Company or broker is not necessarily the interest rate you were qualified; here are several tips to help you avoid paying too much for your mortgage interest rate.

What is Mortgage Interest Rate Lock In?

“Lock In” is the way your mortgage company guarantees your interest rate for a specific period of time, this lock in should also include any points you agree to pay along with what you are getting in exchange for paying the points. The duration of your mortgage rate lock in needs to allow you enough time to close on the mortgage. Failure to close before your lock expires means the mortgage company can and will raise your interest rate. It is important to get your mortgage rate lock in writing; any negotiating you’ve done for terms and mortgage rates is meaningless until you have it in writing.

Mortgage Rate Lock: The Most Important Number

The mortgage interest rate guarantee you receive from your Mortgage Company or broker is almost never the interest rate you qualified for. When you applied for your mortgage loan, the wholesale lender your mortgage company or broker represents qualified you for a specific mortgage rate. Your Mortgage Company or broker marks up the interest rate to get a bonus from the lender. This markup is known as Yield Spread Premium and will cost you thousands of dollars in unnecessary mortgage interest every year if you agree to pay it.

How Can You Avoid Yield Spread Premium?

Tell your loan representative that you will not pay Yield Spread Premium and ask to see the mortgage rate lock from the wholesale lender. Compare the interest rate your wholesale lender locked you at with the interest rate guarantee from your loan representative and you’ll be able to spot the markup. If your mortgage company refuses to remove