Korene's Blog

Should You Lock in the Rate?

Being a first-time homebuyer can be stressful. There’s so much to learn. Even people who have bought homes before can find the process stressful. To reduce the stress you experience, consider why you might want to lock in the rate before beginning the process.

The process for purchasing a home basically follows this order:

Unfortunately, the interest rate may change dramatically from the time you start the process to when you actually close on the house. To avoid a large change in interest rate, and potentially add hundreds if not thousands to the price of your home over the course of the loan, you can lock in the rate when you fill out the application.

There are 2 different decisions to make about rates. One, the interest rate and points can both be locked in to protect you from any changes in the market however you would still be locked in if rates fall. This is like buying a stock. Once you have entered your price you can’t cancel it if the stock price goes down.

The second option is to allow both the interest rate and points to float which could greatly add to your final costs if rates go up. This simply means that you are subject to market fluctuations which could be to your benefit or detriment.

Find out how long processing your loan will take. This will enable you to choose the right time to ask for the interest and points to be locked in. In most cases the lender will hold the interest rate for up to 60 days.

Some lending institutions will allow you to lock in the interest rate and points for longer than 60 days, some considerably longer than 90 days. However, if you choose this option you’ll be expected to choose one loan and stick with it. You may also pay a higher fee for having the interest rate and points locked in for an extended period of time. The longer the rates are held in check, the more you’ll pay in fees. You may also have to pay an upfront lock fee which is non-refundable should the loan not be completed before the lock in date.

Any good real estate agent will recommend locking in the interest rate as soon as you can to avoid paying too much. By locking the interest and point rates, you’re guaranteed to receive those rates at closing as long as the lock is in place. This means your loan will have to be completed and the house closing done before the lock in date expires.

Be sure to get all rates, including locks, in writing separate from your application. You’ll also want to ensure the actual lender is offering the lock. Ask them to include a written confirmation of how the fees will be refunded or credited at closing. This will save you a good deal of headache and stress when you close on your house.

Ultimately, you want to get the best interest rate and points possible for your personal situation and goals when buying a home. You knew why you wanted to lock in the rate already, but now you know how and will have a better chance of getting that interest rate and locking it in to avoid surprises at closing.

I am available to help you with your purchase or refinance or maybe a mortgage tune-up review would be helpful...Call me and I will help you!