Skip to main content

When do you lock your mortgage rate?



Locking your interest rate protects you from increases due to market conditions.  Locking early safeguards your budgeted payment.  By locking the rate, if the market goes up, you get the lower rate; if it goes down after the lock, you may be able to pay a fee and lower the rate.

Knowing when to take the lock is determined by which direction you think the market is going.  If you think rates are going up, lock in early.  If you think rates are going down, ride the rate to within a few days of closing.

Some lenders may allow a borrower to lock a rate after pre-approval but is more common to not offer a lock until there is a signed contract on a home.  Even with a pre-approval, it could easily take 30 days or more to close a transaction and the rates can move a lot in that period.

There may be a fee charged to lock a rate which is determined by the lender.  Generally, the longer the time for the rate lock, the higher the fee.

There is a lock period established by the lender that guarantees the rate, if the loan is closed by the expiration date.  Normal lock periods can be between 30 to 60 days.  Longer periods may be available but will probably require higher fees.

Things that could affect your rate lock are:

  • The appraised value comes in lower than what was expected in the sales contract.
  • The borrowers' credit changes considerably before the closing.
  • The loan amount changes after the rate lock.
  • The loan type changes.
  • The down payment decreases before the closing.
  • Some income, like bonuses or overtime, could not be verified.

If a higher rate at closing means that you will no longer be able to qualify for the mortgage, it may be more important to lock in early.  Looking at what the rates have done for the preceding weeks may indicate a trend but at the same time, markets have turned overnight and started moving in the opposite direction.

A trusted mortgage professional can give you good advice and why they feel you should either lock the rate or let it ride.  Your real estate agent can help also but ultimately, the decision is yours.

Comments

Post a Comment

Popular posts from this blog

Make Your Home Offer the Most Appealing

Sales in February 2023 were up 14.5% month over month and still down 22.6% year over year according to the NAR Housing Snapshot.   The median sales price dipped 0.2% to $363,000 and there are 2.6 months supply of homes on the market compared to 1.7 months a year ago. "Inventory levels are still at historic lows, and consequently, multiple offers are returning on a good number of properties." According to Lawrence Yun, Chief Economist for the National Association of REALTORS�. It is still important to have a strategy for potentially competing with other buyers on the house you want to buy.   The plan should include several available provisions and options, so that at the time of drafting the sales offer, you can consider exactly what to include based on the situation. Unless a person is paying cash, you need to be pre-approved by a trusted mortgage professional long before you start looking at homes.   Include the written pre-approval letter along ...
Post a Comment
Read more

Cash-Out Refinance

With the rapid appreciation that homes have had in the last two years, most homeowners have equity.   A common way to release part of the equity is to cash-out refinance but some homeowners may not be eligible currently. This type of loan replaces the current mortgage by paying it off and an additional amount of cash for the owner.   Generally, lenders will consider a new mortgage up to a total of 80% of the current value. Typically, the rate on a cash-out refinance will be slightly higher than a traditional purchase money mortgage.   As is in any lending situation, the rate depends on the borrower's credit and income.   The best interest rates are available to borrowers with higher credit scores, usually over 740. Loan-to-value can affect the rate a borrower pays also.   A 70% loan-to-value mortgage could be expected to have a lower interest rate than an 80% LTV because there is a larger amount of equity remaining in the property and therefore, less risk ...
Post a Comment
Read more

Before You Leave Town...

Along with all the planning of what you're going to do and where you're going to stay, consider this checklist to make you feel more comfortable while you're away from home. Ask a trusted friend to pick up your mail, newspaper and keep yard picked up to avoid an appearance of not being at home. Stop your mail ( USPS Hold Mail Service ) and your newspaper. Don't post about your trip on Facebook and other social media until you return; some burglars look for this type of announcement to schedule their activities. Do notify police or neighborhood watch - especially if you're going to be gone for more than just a few days. Let your monitoring service know when you'll be gone and if someone will be checking on your home for you. Light timers make it look like someone is home. Set multiple timers for various times to better simulate someone at home. There are plug-in modules for lights and appliances that would allow you to control...
2 comments
Read more