Interest rate change following loan disclosures being signed

[Josh Setterbo]

BP,

We have a home under contract with conventional financing. At the time of the loan disclosure document signing our interest rate was 3.375%, this was on July 7th. Today our lender asks if we want to lock in the interest rate, which we assumed that we had. The fed has raised the interest rate to 3.5% and we now have the options of:

You have a choice of a lender credit of $1,211 (to be applied towards closing costs) with a P&I payment of $1,447

OR

you have a choice of a rate buy down of $1,211 (added cost- paid at closing) with a P&I payment of $1,425

What was not made clear to us was that we needed to give a verbal, "Yes, we want to lock in the great 3.375% interest rate". I am just trying to figure out if this happens and you have to deal with it. Or if something was overlooked by the lender not to secure the rate and we are responsible to foot the bill.

Thanks for the advice,

Josh

[Chris Mason]

@Russell Brazil, technically it doesn't need to be locked weeks in advance. That being said, It makes a crap ton of sense to lock it well in advance of closing so no one feels bait and switched like OP here, but technically it isn't a requirement. 

@Josh Setterbo, the fed does not set mortgage interest rates, but interest rate pricing does fluctuate day to day.

The difference between those two options is about $2400, which is 75 basis points for a ~$322k loan amount (hope you don't mind that I backed into it from your P&I payment). 75 basis points for 1/8 to rate is a bit pricey of a buy-down; the price ranges from 25 basis points on the low end to 80 on the high end. 109 month break-even, meaning the higher interest rate is actually better unless you are certain that you will own the place for at least 9 years without refinancing (for example if you are going to refinance to drop PMI in <9 years).

So that's my little picture advice. 

Big picture:

It's your lender's job to advise you of your options and what makes sense, to communicate with you about the largest financial event of your life to date (& to respect that fact), and I could go on and on. I'm going to suggest finding a new local lender to work with on your next real estate transaction.