Brokers know that one of the unusual things about the mortgage business is that it offers borrowers an opportunity to “lock in” a rate for a certain period of time. Orion’s management brings this up because brokers should remind borrowers that they should not take it for granted, and fully understand its implications.

If a person is going to buy some gasoline, or a refrigerator, they can’t tell the gas station owner, “I’d like this price a month from now” or the appliance store clerk, “I’d like to buy the refrigerator three months from now at the price you’re advertising it for now.” But the home loan process is different, and Orion offers your clients a “mortgage rate lock” that is an agreement between a borrower and Orion that allows the borrower to lock in the interest rate on a mortgage for a specified period at the prevailing market interest rate.

Some believe that a loan lock, typically for 30 to 60 days, since that is a standard loan processing time, provides the borrower with protection against a rise in interest rates during the lock period. Orion and other wholesalers may charge a lock fee, especially if the lock is for an extended period of time. The lock guarantees the current rate of interest on a home loan while a home buyer proceeds through the purchase and closing process and protects borrowers from the potential of rising interest rates during home buying or refinancing.

But what if rates on home loans go down? Some rate locks will also grant a float-down provision that will allow the borrower to take advantage of lower rates in the market as they occur, while still protecting them from increases. Brokers know that there is no “free ride” when it comes to interest rates, and the cost for a feature like this, or even the rate lock itself, is incorporated into the pricing that is given to borrowers up front.

Usually, Orion has an investor who will be purchasing the loan and is depending on being delivered a loan with the characteristics initially promised. But Orion understands that things can change during the lock period until the loan funds, so the rate and price that are “locked in” may also change. When a borrower locks in an interest rate on a mortgage, it should be binding for both the borrower and the lender, and the rate will stay consistent, regardless of market changes as long as there are no changes to the application for the loanduring the closing period. If there is new or corrected information on the borrower’s income or credit score, or if the loan amount changes, these could affect the interest rate regardless. And if the borrower changes the type of mortgage they are seeking or if the appraisal of the home is lower or higher than anticipated, the interest rate may change.

Check with your Orion AE for an explanation of pricing, rate lock details, and how changes are handled. We pride ourselves on being customer friendly!

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