You’ve done your homework, interviewed various lenders and got solid quotes on rates and fees from all of them. You’re good to go, right? Nope. You need to separate the tortoise from the hare. Is the lender quick or s l o w ?
When you apply for a mortgage and you get a competitive rate quote it’s important to understand that it costs lenders, and everyone actually, money to hold onto funds designated for mortgage loans. Lenders don’t pull money from their sofa cushions full of cash to fund a loan, they typically draw from previously established credit lines. And when a borrower locks in an interest rate the lender essentially sets aside your loan amount at your desired rate and hopes to close your loan before your lock expires. If not it can cost everybody.
The processing time for a mortgage loan is the time it takes for a lender to move your loan through the approval process, print your closing papers and transfer money to fund your mortgage. For instance, say you just signed a sales contract and you close in 30 days. It’s important to close your loan during that time, don’t you think? If you don’t close during the required period then bad things can happen such as forfeited earnest money deposits or losing the home altogether.
When you get a rate quote, you also need to know how long it will take to close your loan. Certain lenders can take much longer than a 30 day period. And if you’re refinancing and your rate lock is only good for 30 days but the lender is taking 60 days to fund a loan; what good is a 30 day lock?
Pay attention to rate quotes. And pay attention to lock agreements. They’re both equally important. Without one of them, the other doesn’t matter.