Don t Let Rates Get You Lock It
Below is a MRR and PLR article in category Finance -> subcategory Other.
Secure Your Mortgage Rate: Lock It In
Summary:
When mortgage interest rates start climbing, locking in your rate can protect you until closing.
Article:
As mortgage interest rates begin to rise, securing a locked rate can safeguard you until the closing process is complete.
Over the past year, the average rate for a 30-year fixed mortgage has increased by nearly 1%. Though this rise has been gradual, many homebuyers can't afford the risk of rates climbing between their mortgage application and closing. They're already pushing their financial limits to purchase a home.
If you don't lock in your rate, it remains vulnerable to market fluctuations. A traditional rate lock is a promise from the lender that your mortgage will have the specified interest rate, points, and terms at the time of closing.
Rate locks are typically set for a certain period. If your home purchase isn't finalized within this timeframe, your rate unlocks, leaving it susceptible to increases.
For those who qualify for a mortgage close to their maximum limit, any rate rise before closing could necessitate a larger down payment or even jeopardize financing. A rate lock can offer crucial protection.
In a traditional rate lock, if interest rates fall, you're often bound to the original rate unless you incur additional costs. Some lenders provide "float down" options, allowing for a rate reduction once if rates decline. However, if rates rise again, you might revert to the higher rate.
Ensure everything about your rate lock is documented. Verbal agreements aren't legally binding. If a lender claims your rate is locked, insist on written confirmation.
Be mindful of the lock's expiration. Some lenders might automatically extend it, but this isn’t guaranteed. Extensions often come with fees, usually a percentage of the loan amount.
The rate lock agreement should encompass as many costs as possible, including interest rates and points. It must list your name, the lock’s effective date, agreement date, lock cost, locked rate, and loan terms. An expiration date and any options post-expiration should also be outlined.
Once you spot a desirable rate for your mortgage, lock it in, typically when applying for the loan. Before setting the lock-in period, estimate how long the loan processing and home purchase will take. After locking in, ensure you and all parties involved expedite the closing process by promptly handling phone calls and paperwork.
Rate locks come at a cost. Some lenders charge an upfront fee, even if the loan doesn’t close. Others impose a flat fee at closing, or a fraction of a percentage point based on the mortgage amount. The cost varies with the chosen options and mortgage program.
Don’t let rising interest rates catch you off guard at closing. Lock in your rate and focus on other aspects of your home purchase.
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