The following list of best practices are being shared with us today by Clarion Mortgage as sent to Clarion LO’s in an internal email. These guidelines are excellent rules of thumbs for any originating loan officers or mortgage brokers operating in the existing changing environment we live in today.
Guidelines For Locking When to Hold Off On Locking
The decision to lock a loan – or more importantly, when to hold off on locking – has never been more important in our industry. Lender approvals, preferred pricing incentives, and even the ability to lock in itself, are all reliant on the decisions you make in regard to locking your loan.
Below are some guidelines to follow to help you better determine when it is appropriate to lock.
Do NOT Lock When…
1. The home is located in a unique neighborhood where “like comps’ will be difficult to obtain;
2. When, after running comps, the value you see varies by 10% or more from what is needed to qualify for the loan;
3. When it is a government loan and reliant on the appraised value;
4. When it is an investment property that will require a desk or field review appraisal
5. When it is a condo project that is non-warrantable or until you receive a Condo Certification as required by the lender
1. When you know that the borrower is rate shopping or has applied elsewhere
2. When you have not seen all of the financial documentation to confirm assets and income
3. When ratios are very tight and allowable income/assets could come into question
4. When obtaining gift funds and the money has not yet been sourced
5. If there is any question or concern about employment
6. If you have any feeling that the borrower may back out of the loan
1. When there is a 2nd that needs to be subordinated
2. When you have priced yourself so tight that any potential lock extension will kill the deal
3. Before you have taken a complete application
4. Before you have an AUS Approved finding
5. When there is a question as to your ability to close the loan in the time frame you have been provided (for example: a real estate transaction that is contracted to close in 30 days when you know the reasonable expectation is 45 due to the lender you have selected and/or industry turn times)
6. If you feel that, based on current market conditions and trends, rates will improve significantly in the next 21 days (or until you are ready to order loan docs);
7. Unless you and your borrower have agreed to lock at the rate and terms offered and that they understand the commitment being made by them, along with the risks and rewards of doing so.
If all of the above criteria have been met, you should have a very strong comfort level in locking your loan with the confidence that it will close.
Following these guidelines will generate great benefit for you and all of Clarion as it will ensure stronger pull-through percentages, allowing us to secure better terms and pricing incentives from our lenders. This, in turn, will help you to be even more competitive and earn more income.