Thursday, November 13, 2014 - Article by: Lender411 Member
The age old question that every client ever applying for a loan has asked. "What is the best day to lock in my loan rate"?? This is the opportunity for every loan officer to take a stab at acting like a Stock Broker. Yes there are at times indicators based on certain factors that may help determine whether it is better to lock today vs tomorrow etc. But lets face it we might as well just flip a coin. The one may problem all loan officers face when it comes down to locking in the loan rate; the consumer wants all the reward without any of the risk. The consumer wants the lowest rate possible, but they also want to hedge their bet just in case rates get lower. The loan officer can't win in this sceanrio. Yes, some lenders offer a one time "Float Down" in case the rate gets better. But, this option has limitations & in most cases does not really help the consumer or the loan officer.
So what is the answer to the $64 question? The single best day to lock your loan is always on Sunday!! WHAT !! SUNDAY !! Think about for a minute. Eveytime a borrower locks their loan the very next day comes the "Loan Lock Remorse" . Remember loan officers it is never how much money you save the borrower; it is about how much more money they could have saved with a lower rate. Yes, I get the fact you can never really lock a rate on Sunday unless it is some kind of holdover. OK, what is my real answer.
I would always make a point to tell my borrowers about the "Risk vs Reward" of locking to early vs to late. Instead of having the daily conversation of if this is a good day to lock or not? I would give the borrower a time line based on when we expected the loan to close and tell them you can lock when we are 30, 20, 15 & 10 days out. I would give them 4 days to decide whether to lock or not. Then I would give them 2-3 reasons why they should or should not lock at that time. I understand every loan file takes on a life of its own and only locking on 4 particular days may not always be advantageous. But my goal was not to play stock broker or pretend I have the interest rate "Crystal Ball". because as soon as I became the "the rates are going up or down expert"? Then I also become the goat 50% of the time when I am wrong. I am in a NO WIN situation. So my goal is to put the ball in the borrower's court so they can play "DAY TRADER" vs me being the Stock Broker.
Has this philosophy worked? I guess it depends on the environment in which one works. But overall it has been successful because it is an easy way to set expectations. For the most part gone are the old days where you could just flip the loan to a different lender or investor if there was a significant rate change.
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