- The Washington Times - Wednesday, March 9, 2005

Q:We may have missed the window, but my husband and I are looking into refi-

nancing our home.

We found the company with the best rate and called the advertised number. The loan officer said that the rate was good for 15 days and that because it takes 30 days to process the loan, we would have to “float” the rate until we are within 15 days of closing.

This makes me nervous. Any comments?

A: Yes. Avoid that company. It is advertising a rate it cannot possibly guarantee.

You are right to be nervous. Mortgage rates have trended upward in the past few months, and there’s a very real possibility that rates could continue to rise during the next few weeks.

It seems to me that an advertised interest rate should be for a lock-in period that’s long enough to get the application processed and closed. A published interest rate is, indeed, subject to change until it is locked in, but if a published rate cannot be locked until the applicant is well into the process, it’s a meaningless quote.

The lender you spoke with is throwing a fishing line out with a hook and bait at the end.

When an application is made, borrowers are given the option to lock or float the rate. If the borrower chooses to float, he is taking a chance. If interest rates fall, the borrower can eventually lock into a lower rate. If rates rise and the borrower is not locked in, the rate floats away.

I usually advise that clients lock their rate at the time of application because no one can accurately predict the movement of interest rates.

Besides, refinancing is refinancing, not gambling. There are dozens of external factors that can make interest rates jump.

Economic news that surprises the market is the most common reason for interest rates to abruptly change. If, for example, the next government report on consumer prices indicates a sharp and surprising rise, you can bet that mortgage rates will instantly climb.

If you have a loan in process with a locked interest rate, you’re protected, as long as the loan closes before the lock expiration date.

Here’s a quick checklist on how to choose a mortgage broker or lender:

• First, as I’ve said many times before, ask someone you trust, such as a neighbor, friend or colleague, if they have had a good experience with a particular company. If someone else has had a good experience, the chances are that you will, too.

m Don’t inquire only about interest rates. Make sure you know all the fees and points involved.

m Make sure you ask how long the rate can be locked, and get assurance from the loan officer that the loan can close within the lock-in period.

m Be upfront with your loan officer. It’s his job to help you. A good loan officer will ask questions so he understands your mortgage situation and overall objectives. He will then be able to make recommendations that best suit your objectives.

m At the same time, ask any questions you might have and expect clear and cogent answers. If you feel you are getting the runaround, you might want to change companies.

As I said, reputation spreads quickly, and if you contact a mortgage broker that has been highly recommended by a trusted source, you will probably be in good hands.

Henry Savage is president of PMC Mortgage Corp. in Alexandria. Contact him by e-mail (henrysavage@pmc


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