How To Lock In Your Rate Properly
Have you ever bought a home before? If you are new to home buying, the thought of a Rate Lock may be new to you. If that's the case, you're in luck. This is the blog for you! Our mortgage professionals at the Lake of the Ozarks are here to give you some KEY information on how to lock in your rate properly. If you end up having any questions about this, please do not hesitate to give us a call. MHQ - Mortgage Headquarters can be reached at (573) 302-9990.
How To Lock In Your Rate Properly
1. Understand FULLY what a Rate Lock Is.
It means that you are guaranteed to keep a specific interest rate for a certain number of days for your application process. This keeps you from going through your whole application process and finding out at the end that the interest rate has gone up.
- Rate lock periods can vary in length, anywhere from fifteen to sixty days, with the longer ones usually costing more.
- A lender may agree to lock in an interest rate and points for a longer period, like sixty days, but in exchange, the rate (and sometimes points) will be more than with a rate lock of a shorter period.
2. Know That There Are Even More Ways To Save On Interest Outside Of Rate Locks
In addition to choosing the shorter rate lock period, there are other ways you can attain the lowest rate. A larger down payment will result in a better interest rate since you will have more equity at the start. You can pay points to improve your interest rate for the life of the loan, meaning you pay more upfront. One strategy that makes financial sense for some is to pay points to reduce the interest rate over the term of the loan. You pay more initially, but you will come out ahead, especially if you keep the loan for the full term.
It's not easy to determine the perfect time to lock a loan, but MHQ - Mortgage HeadQuarters can give you advice on what we would do if we were in your shoes. We can also check with the loan processor to get a feel for how long it will take to have the loan go through underwriting, which can better help you decide if and when to lock in your rate.
3. Lock In Your Rate As Early As Possible.
Individual borrower circumstances influence the best time to lock. For example, borrowers concerned that even a small increase in the interest rate could cause a budget problem should lean toward locking in the rate as early as possible, especially in a market with increasing mortgage rates.
The earliest point at which a borrower can lock in a loan is after the initial loan approval. However, many borrowers wait until they have found a home to purchase because they don’t know how many days it will take to find a home and have an offer accepted. They worry that by locking in too early, they may miss the opportunity for a better rate before they complete a purchase or get stuck paying extra to extend the lock once it expires.
And remember, a rate lock is not guaranteed in all circumstances. Borrowers can lose a rate lock if their circumstances change before settlement, such as a shift in their credit score or in their debt-to-income ratio. It's important that the borrower doesn't do anything to affect their credit or income during this time.
Want To Learn More About Mortgage Rate Locks?
All of us here at MHQ - Mortgage Headquarters can be reached at (573) 302-9990 if you have any questions about rate locks. We hope you found this blog enlightening and helpful in your home loan process. We are here to help you in this process and would be happy to answer any questions you may have. Be sure to follow us on our social media channels listed below to stay up to date on our latest mortgage tips!
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