One thing that loan officers like to make clear as it relates to interest rates and VA loans is that any quoted rate isn’t official until the borrower specifically makes a direct request to lock in the rate. When buyers first begin researching information about VA loans and interest rate information they discover that rates can be rather fluid. A loan officer can quote an interest rate today on a 30 year fixed rate VA mortgage but one week later that very same scenario can have a different rate attached to it. Why do rates change and when should you lock in your rate?
Each day, mortgage lenders publish their interest rates for their loan officers to use. There will be different rate choices for the same loan program, depending on how many points the borrowers may or may not want to pay. For example, consider a 30 year fixed rate for a VA loan. The loan officer is contacted and after the loan officer asks a few questions such as the size of the loan and basic credit information, there might be a choice of say 3.75% with one discount point, 4.00% with no points and 4.25% with no points and a lender credit toward closing costs. The borrowers and the loan officer can run the various scenarios and calculate monthly payment associated with and without paying any points.
It really doesn’t matter to the lender if a buyer decides to pay points or not pay points as the lender gets the same return either way. A point is expressed as a percentage of the loan amount and is a form of prepaid interest which the lender receives in exchange for the lower rate. It’s completely up to the borrowers.
But whatever the rate choices may be on any given day that rate is no good until it is locked in with the lender. One of the many disclosures borrowers receive upon the submission of a completed loan application is the lender’s policy on interest rate locks. Some borrowers may assume that once an application is submitted the rate is automatically guaranteed, but it’s not. The rate lock disclosure informs the borrower when and how the rate can be locked. This form is to be read, signed and returned.
Typically it is up to the borrower to check on interest rates daily as the loan is being processed or otherwise lock in the rate upon submission to the loan officer. Once a rate is locked the borrowers are protected should interest rates go up while the loan is being processed. Lenders also offer shorter and longer term rate locks. Rates can be locked in for as little as 10 to 15 days, 30 days, 45 and so on. The difference between these rate lock terms is the cost. The longer the borrower wants to lock the higher the cost. A lock for 30 days might cost another 0.25 in points compared to a rate lock for 15 days. Rate locks should be issued only for as long as it is needed to process and close the loan. When buying a home and using VA financing, it should take no more time to process and close a VA loan compared to any other type of mortgage and the rate lock process is exactly the same. The borrowers must make a direct request.
You’ll need to have a completed loan application which means you must have a property selected and a sales contract with a set closing date in order to lock. In most cases, you won’t be able to call up a lender over the phone and request a lock on the spot. Unless you’ve got a complete loan application, your lock request will likely be rejected.
Buyers can read more about VA loan guidelines here. Coast 2 Coast is proud to waive all lender fees ($1,500 value) for active military personnel, veterans and first responders. Please contact us above with any questions about VA, FHA, USDA, or Conventional loan programs.