A loan banker told me that he locked a loan for me. Am I legally obligated to this loan and/or mortgage broker?
Not legally obligated, but there may be consequesnces if you do not follow through with the deal. If you have wisely chosen a trusted mortgage advisor to work on a loan for you and you are deep into the mortgage process then you need to understand that your mortgage advisor has done hours of work, pro-bono, to find you a solid rate and program and is expecting your business for not only this transaction but your future mortgage needs as well.
Most Mortgage Loan Officers do not get paid hourly, they are paid on a commission basis. When they lock a loan they are expecting you to be on board with the program that they have offered. If you terminate the deal the loan officer gets no compensation.
In an environment of increasing interest rates, you may lose a loan that was locked in at a rate that may not be available in the very near future. This costs you (the borrower) monthly.
The Lender that is lending you the money is also counting on your follow through. When a loan is locked the lender makes funds available for your loan at that locked interest rate. If your rate lock expires the cost of funds can increase. Also, the loan broker loses favor with the lender due to empty promises.
If the loan banker has done something to upset you as a consumer or if you dont feel that their service is up to your standards then you ultimately need to make yourself happy and make the right decision and move on to a better banker.
I'm NOT an attorney so if you are looking for legal expertise contact a real estate attorney. However, generally speaking, my experience tells me that you are only legally obligated to do something if you signed something or have a verbal agreement to go with this loan. Personally, even after we have the legal documents signed to force the issue we will NOT chase after someone whom we have locked a loan for.
In fairness to your banker/broker - this can cost them money so they may make you pay a committment fee or deposit of some sort - although my company does not.
My advice to you is to ask them lender/broker/banker if you are legally obligated to them. If they say yes, have THEM prove it.
No, absolutely not.
When you lock a rate with a lender, they fix the rate with their investor. A lock is valid only for a certain period of time, you should make sure you get this information from the lender. Typically a rate is locked for 30 or 45 days, but can vary.
In a market where the interest rate is going up, if you lock the rate, this is to your advantage. If the interest rates are moving down or are in an unpredictable state, you might choose to " float", that is let your rate adjust as the market conditions change. Generally this is risky and will more often work against you than for you.
If you do lock the loan and you think the interest rates are dropping, you should just double check with the lender that rates have not gone down from the original lock rate before the documents are drawn on the loan. If they have changed, you can choose to have them release and change the lock.
You are not obligated to anything until you sign the loan documents.
Be aware that many lenders use the lock to create a sense of obligation in the borrower to that lending company. An unethical lender may play games with the lock and let the close date slip past the lock expiration. Be aware that it can take many lenders over 30 days to actually process a loan from the time the rate is locked, stay on top of it and your lender.
Being locked for a loan does not obligate you, it obligates the mortgage company. The "lock" simply says that you are entitled to a certain rate for a given time. If you have a lock at 6% for thirty days and you find a rate for 5 7/8% you are free to take the lower rate without recourse. Of course, most companies have charged you an application fee and done considerable work for you by the time you get the lock. The practical time to shop for a rate is before you get a lock unless you are in an era of quickly falling rates.
It is also important to understand that rates are not everything. Obviously, it is the simplest way for an individual to determine the cost of the loan to him or her. Being knowledgeable in all terms of the loan transaction are preferable to just rate shopping.
The important thing is to work with a knowledgeable mortgage representative that is willing to discuss your needs and find the best product for you.
Locking in an interest rate only guarantees that if your loan is underwritten and approved by the actual lender and you close that loan prior to the expiration of the lock period you will be given the rate you locked in at. However this does not obligate you to do business with the lender/broker who locked that rate for you. It is only the means used to assure you their client that if all of the conditions of the loan program are met that interest rate will be yours even if market conditions change. If you paid any upfront fees to secure the lock they could be lost if you cancel your application.