The bank gives you a commitment letter at some point along with a required Good Faith Estimate of your loan amount and interest rate. Then they will "lock" in that rate for 30-60 days. If rates drop, can't I just go to another bank if they aren't willing to lower my rate before closing? I realize that starting the process over is a pain, but am wondering at which point I have to follow through with the lender.
Well, I think you need to read whatever you signed so far. I was in a similar situation, and none of the documents I signed before closing obligated me to do anything. I was signing that the data I supplied was truthful. I suppose it wasn't kind of me to walk away from the first bank, but the rate fell, and the new bank was giving the lower rate, while mine stuck to the 'lock-in'.
Read what you sign. My wife used to work for a mortgage broker back in the boom, and people could not show up at signing and there is nothing anybody can do about it. I assume you are free to walk anytime, especially if you have signed no contract.
The only real consequence is that lender won't want to work with you, (but if they won't fix a lower rate for you, then some might say they weren't in the first place).
When I got my papers (5 years ago) I signed nothing until I got the loan. I got good faith estimates all over town and gave nobody my signature. Has the deal changed since then?
You are shopping but depending on how long you are in the process, your original lender may become passively upset and withhold the appraisal and other pertinent info from your second lender. Plus, the seller may not extend your contract to accommodate you. When a lender locks a rate they are obligated to deliver a mortgage to the secondary market Not sure, but I believe many times they have to pay a fee if they don't.
It isn't fair. Perhaps in the future, when consumers lock a rate, they should make a deposit, and forfeit it, if they go elsewhere. Or they have the ability to lock you at a .25% rate lower if the market drops. Realtors have that clause, home contractors also require an upfront fee.