Interest Rate Lock with a Lender if I'm Lender Shopping?

[Sarah K.]

I'm new to real estate investing and I've started to analyze deals in my area, which has been a difficult area to find a good deal (North Idaho). I've been talking with different lenders and I've been pre-approved with two residential lenders this last week. Since rates are rising, one of them offered for me to sign an Interest Rate Lock Agreement with a No Float option. I'm still getting my head wrapped around the lock agreements and the float/no float options, could someone give me a brief summary on how the benefits/disadvantages of signing an agreement like this?

Also, I am unsure if I should be signing any of these types of documents with one of the lenders if I might end up using a different lender once I find my first deal? One of my lenders said they cannot do a rate lock until I'm under contract, but this lender that sent me the agreement said they're able to do the rate lock for 61 days.

Lastly, it says on the document that if I need to change the lock agreement or cancel it, I am subject to additional fees, but it doesn't say how much the fees are. So does that mean if I use a different lender I still owe this lender a fee to cancel their lock? Or does that only apply if I use this same lender? It would probably be easier if I would just ask the lender directly these questions, but I've had a bad experience in the past telling a lender that I was talking to other lenders.

[David M.]

@Sarah K.

If you haven't purchased a home before, usually after you get under contract you would apply for the loan and at some point "lock your rate."  

So, if you lock your rate in with this lender now..  yes, you'd have to use that lender to get the rate.  Yes, you'd have to close on a property before the rate lock expires to get the rate.  So, it doesn't make sense at all for you to lock anything in since you are uncertain of finding a deal in the first place.  Its just a waste of money.  The costs to lock in another rate will vary depending on the market conditions.  I'd have to look at the wording about changing or canceling.  Usually when the lock expires, it just expires...  Honestly, this lender doesn't sound like a prudent one to work with so I'd drop him/her.

When looking for lenders, I usually just go after service.  Rates tend to be in the end about the same since if you are getting conforming loans they are all sold off to the same secondary market so the rates are all about the same.  The quality of service that matters since it can so seriously reduce your stress levels.  However, that being said I know many people who don't care about 30-45 days of super stress as along as they get that 1/8 point better rate...

Good luck.