Lock in Your Interest Rate
Interest Rate Lock
An interest rate lock is key to ensure you will get the interest rate quote provided by the lender or by the mortgage broker. When purchasing real estate or just refinancing an existing mortgage
, you will have to lock in your mortgage interest rate. This can happen early or later in the loan process
and ultimately it is up to you do decide on timing.
When you are comparing different lenders, each one will present you with a mortgage rate quote. It will be of no practical use until you lock the rate. By having an interest rate lock, you get a secure interest rate along with other several terms like:
- Mortgage index
- Prepayment penalty
- Initial, periodic and lifetime caps
- The time period of which the lock covers
How Interest Rate Lock works
You should be aware that once you lock your rate, there is no way to change it unless you wish to slide up or down the scale on that same day's locked rate sheet. For sure this option is not for free and it comes with the cost of having a lower rate than the one you locked, but you won’t get the lowest possible rate currently available. You can only go back to what was offered that day your interest rate was locked. Also, you will pay somewhere between a fraction of a point and half a point to have it.
We are accustomed to seeing up to 60 days of rate locks. It is proof of the common fear in the mortgage market, where everybody thinks that mortgage rates will go up.
There is an important thing to note about an interest rate lock: your rate lock is tied to a property address. Therefore you must either own the home of which you are refinancing or you must be in contract to purchase a home. Either way the property address links you to the interest rate lock.
It is true that a 60-day rate lock will cost you more than 30 or 45 days. Most rate locks tend to fall within 15 to 45 days. When speaking about mortgage rates, it’s practically impossible to predict what is going to happen over the next couple of months.
Safeguard yourself and get your Interest Rate Lock in writing
Make sure you have your rate lock in writing if you are a hundred percent sure you want to proceed. Don't assume you have an interest rate lock. They may tell you that your rate is locked but at the same time, they may be floating it & did not formally hit the lock button. It is also possible that you have been misquoted, and they are hoping the mortgage rate will come down.
With all said, make sure you know what you are going to get. Also, check the terms of your mortgage rate lock. Any mistakes will effect to higher rates for many years to come! And don’t forget to get your lock confirmation in writing before moving forward. All lenders, large or small must disclose to you your lock in the form of a change of circumstance. This is a form that comes along with a rate lock Loan Estimate.
How your credit score affects the Interest Rate Lock
When you are shopping for a mortgage, you need to compare different things, not just rates. Mortgage companies that lock your rate for long periods of time can safeguard you from the volatility of interest rates. Your credit score will make a significant impact on the interest rate lock. Make sure you do not make any major purchases before buying a home or allow a credit inquiry. Stay away from using charge cards/revolving lines of credit.
Do you have questions about the mortgage process? Casey Moseman is here to help! Whether you just need some initial advice, an agreement in principle or a mortgage application
Casey Moseman can help.
Casey has your best interests at heart. She will search for multiple lenders across the country. Looking for great rates and exclusive programs is what she does best. All the while she also takes into account your financial situation. This is coupled with the reliability and reputation of the lender. If a program offer sounds too good to be true there is a good chance that deal won't close.