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I am in the middle stage of the loan approval process. Since all the uncertainty about the debt ceiling has been going on, I had asked my lender to give me a rate lock on the loan. But what he has provided is a a document called as the good faith estimate with the loan rate and other details.

But I thought that rate lock would involve me and the lender signing some kind of agreement.

The lender is assuring me that that document is indeed a proof of a rate lock, but I don't seem to be convinced, since neither of us has signed that document.

Is this the standard practice for locking mortgage rates?

Am I being overly paranoid and cautious here?

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A good faith estimate (GFE) is just that - an estimate. The Department of Urban Development made a GFE a requirement by law for loan applications to enable the buyer to compare among lenders.

Furthermore, a GFE is a legally binding document with zero tolerance for some fees like origination charges and lender fees. This means that any change in these fees must be covered by the lender. Some other fees, like title insurance policies, have a 10% tolerance, so they can increase by up to 10%, but if they increase more than that, then the lender is liable for the surplus.

However, rates are time sensitive. This means that the rate you are quoted on the GFE, albeit legally binding, may last for only a second or a very short period of time. Although many quoted rates end up being accurate, there is no legal guarantee to do so.

So I highly suggest you get an official lock-in document to get the agreement on paper. Even if your lender has good intentions and believes the extra rate lock is unnecessary, get it anyways. A GFE's rate quote is not final, and you can only help yourself by getting a letter of commitment that guarantees your rate.

  • +1 How do you tell what the time period for the GFE is. My banker told me mine was 60 days but I never saw a document that said that. Though everything came in on time exactly as promised. – user4127 Aug 12 '11 at 18:58
  • @ Chad: No idea :( It varies from lender to lender but I've never gotten a GFE so I'm not sure what the exact form is like. Your banker/lender's word is probably trustworthy when it comes to these types of details, but try to get things in writing whenever possible. – BlackJack Aug 12 '11 at 19:01
  • @BlackJack Source for the GFE being legally binding? Last time I checked a good faith estimate is just that an estimate and is not legally binding and is rarely worth the paper it is written on. I think a GFE really should be binding but as far as I am aware they are not. – stoj Aug 15 '11 at 11:17
  • @BlackJack never mind the GFE changed a great deal last year and you are correct it is now legally binding. – stoj Aug 15 '11 at 11:22
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No. The period of your rate lock is on the form you signed... if I recall correctly, mine was either 30 or 60 days.

You may be able to extend it for a few hundred bucks.

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