FHA Loan Rules on Interest Rate Lock-ins
When the borrower and lender agree on an interest rate and commit to that rate, that agreement is known as an interest rate lock-in. Negotiating the interest rate is a standard part of doing business with an FHA mortgage.
According to FHA loan rules ,"Under all currently active FHA single family mortgage insurance programs, the borrower and the lender negotiate the interest rate and any discount points." When the borrower and lender agree on a rate and lock it in, another section of the FHA loan rulebook applies.
According to HUD 4155.1., "Lenders are permitted to charge a commitment fee to guarantee, in writing, the interest rate and any discount points for a specific period of time, or to limit the extent to which the interest rate or discount points may change."
How long does the borrower have from the time the mortgage loan interest rate lock-in takes effect? FHA.gov says, "The minimum time for lock-ins or rate locks is 15 days. The loan may close in less than 15 days at the convenience of the borrower, and the lender may still earn the lock-in fees." The rules also state that,"Lenders must honor all such commitments."
What about situations where a re-negotiation of the interest rate is needed? Is it possible for the borrower and lender come to an agreement on a different interest rate than the one agreed to at the initial interest rate lock-in?
FHA loan rules say, "The lender must provide the borrower with HUD-92900-B, HUD Interest Rate Disclosure Statement, to explain that the loan terms are negotiable. The lender must re-qualify a borrower if there is any increase in either the interest rate or discount points."
Under this rule, the borrower may be required to re-submit to a credit check, debt-to-income ratio calculation, or other pertinent re-qualification data as required by the financial institution. That provides borrower and lender with incentive to consider the original interest rate lock-in agreement carefully.
If you have questions about these procedures and requirements for interest rate lock-ins, discuss them with your loan officer or call the FHA at 1-800 CALL FHA.
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