Question: I’m a first time home buyer. Earlier this month I locked in a 3/1 adjustable-rate mortgage (ARM) with the mortgage broker. Because of delays (on my part) it is highly possible that the paperwork will not get completed within the 30 day lock. I’ve tried to educate myself in regard to ARMs vs. fixed-rate mortgages. Sometimes I’m completely comfortable with my decision to go ARM and other times I don’t feel as confident. During the lending process, can I change my mind and go with a fixed-rate loan instead of an ARM? What about if the rate lock expires?
Answer: You locked in a particular loan with a given set of rates and terms. A fixed-rate loan, in your case, would be a different mortgage. This is somewhat like going to a car dealer, ordering a red sedan, and then seeking to buy a red coupe before the first car is delivered.
If the lock runs out and the loan cannot be delivered, then you might want to go for a fixed-rate mortgage.
You could cancel the ARM — federal rules give you three business days to cancel a mortgage — however, this is an extremely unwise choice because you may further delay closing, you may not qualify for the loan you want or you may face higher rates due to changing market conditions.
A larger issue may be this: Can you close on the home under the terms of the sale agreement? The loan delay may lead to a closing delay — and that may lead to an assortment of problems and costs. Speak with your broker regarding the sale agreement and the status of your loan application
