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I'm currently in the process of buying a house. Once the price was negotiated and agreed upon, I solicited quotes from various mortgage brokers. One offered a lower rate than the others, so we picked them. I signed a loan agreement, submitted all my documents, and last week signed a rate lock agreement.

Yesterday (two weeks out from our targeted close date), the lender called to inform me that they could no longer offer the rate on the lock agreement, and offered a much worse deal instead. There were no new revelations in the intervening time. The reason they cited was that I've only had my current job for three months, but they've known that since I began the process, and certainly they knew that before I signed the lock agreement.

Now I have to decide whether to take the crappier loan, or to go back and find another lender and risk not being able to close on time. I might lose the house.

This seems like a clear case of bait and switch to me. I picked these guys because they offered a certain rate, and once I was far enough along to make it hard to go with someone else, they switched it out.

  • Is it legal?

  • Do rate lock agreements have implicit 'out' clauses?

  • Do I have any recourse?

Location: Texas, USA

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There is no such thing as an "implicit" out clause in a contract like this. The onus was clearly on them to consider all the facts before agreeing to lock in an interest rate. The facts have not changed since the lock and you did not misrepresent the facts so they should honor their agreement or pay you damages. Your options are to take the deal, get a new deal elsewhere or take them to court to enforce the deal or recover damages. Those aren't particularly great options but that's the situation.

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