We often get the following phone call from people in the middle of a loan, “I saw on the news that rates have dropped to 4.57%, and I am locked at 4.75%. So can we drop my rate to that now?” The answer is yes and no, but it just is not what it appears.
1. When we lock someone at an interest rate with a lender we are committing to the lender that we are going to follow through and send them the loan. A few years ago it really was not such a big deal to lock and move the loan. But since the change in the industry hit two years ago, lock fall out (as it is called in the industry) is monitored very closely. If we lock loans with lenders then we are expected to deliver, and they closely monitor this. If our fall out rate is too high then they can make pricing worse for us (which makes rates worse for you) or take away our ability to submit loans to them. When you tell us to lock a loan you are committing to follow through also. So changing lenders is not something done without consequence.
2. If we are locked with a lender we cannot just “reprice” or lower the rate with them. Some lenders do have a feature where we can do this, but rates have to have really gone down for it to work. Anytime we lock we always lock with the lender who has the best rate at the time you tell us to go ahead and lock.
3. Related to #2, since we lock with the best at the time, just because rates have gone down does not mean other lenders rates are now lower. It may be that their rates are now even with the lender we have already locked at. Therefore, you still may have the best available rate.
4. The media is not a good source to get a feel for what rates are doing. In fact, they are a very bad source. Why? Because they are always behind what rates are actually doing at the time (they may be lower or higher than what they are reporting because they are typically a week behind reality). They also just throw out a rate. But what determines the “going rate” that they report? Well, if you take all the rates people are getting for the past week and throw them into a proverbial melting pot, then you will get the going rate. But in that pot you will have rates where people are paying no fees, people paying fees but no points, people paying 1 pt, 2 pts, 3 pts, etc. Throw all that together and you get a “going rate”. So a reported rate of “X” tells you absolutely nothing about what people paid to get that rate. Your rate may be higher than the reported rate, but that is most likely because your rate is cheaper than that lower rate. We could absolutely get you that rate, but not with the terms you currently are at.
Does this all make sense? It is a bit deep, but just know that there is only one way to be sure of what rates are really doing…call us. You need to be asking those you trust what they are doing, not paying attention to main stream media. Like everything else in mortgages, you need education and analysis to know what is the best thing for you. That is why we are here; use us.