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Div. of First National Bank of Chester County
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Step Seven - Rate Lock
(The formal acceptance of a rate for the permanent mortgage. In addition to the outstanding mortgage balance, the rate lock dictates what the payments will be over the life of the loan)

- Floating Rate - An interest rate that is not locked in and is moving with the current interest rate market. It is common for construction loans to have a floating rate since the structure will be completed at a later, undetermined date.

- Construction Rate - The interest rate used to determine the interest only payments during construction. This rate locks in 5 business days before initial closing. It is a fixed rate during the construction term.

- Locked Rate - both the borrower(s) and lender have formally accepted the initial interest rate for the permanent loan.

- Rate Lock Fee - 1% of the mortgage amount is collected to lock in an interest rate prior to settlement.

- Construction Loan Deposit - 1% of the mortgage amount is collected at initial settlement. In the case of construction loans, the 1% construction loan deposit is used to offset the modification fees incurred when the loan converts from the construction loan into the permanent mortgage. It cannot be used towards a rate lock.

- Expired Rate - A rate is locked with a lender for a predetermined amount of time. For example, 30 days, 60 days, 180 days, etc. If the borrower(s) do not settle or modify their loan within the rate lock period, their rate lock expires. When a rate lock expires, the rate automatically relocks at the current market rate or the original lock rate; whichever is the higher of the two.

- Automatic Rate Lock - if the borrower(s) fail to lock in the permanent interest rate 5 business days prior to modification, the lender automatically locks in the interest rate.

- Float Down Option - Borrower(s) with a locked interest rate have the option of lowering or "floating down" their permanent interest rate one time before settlement in the event of a drop in interest rates. In the case of construction loans, the float down can occur before modification. There is a fee associated with the float down option.

*** Please Note: Borrower(s) want to be very aware of how rates are moving. To track interest rates, simply call your loan officer or 877-226-5242 and ask for the secondary marketing department. ***

Step Six
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