The most important factor in your mortgage may be the interest rate. Your interest rate will determine your monthly payment and the total lifetime cost of your mortgage. Getting the best rate is crucial to your home buying journey. Understanding when to lock your rate may help save you thousands of dollars over the lifetime of your mortgage.
Daily mortgage rates fluctuate, and as a prospective homebuyer, you may be wondering where that leaves you. What will happen if you wait? When is the right time to lock your rate?
As rates vary, whether you’re a first-time homebuyer, planning on moving into a new home, or looking to refinance an existing mortgage, it’s important to utilize the industry savvy of your loan officer.
What if a lender could guarantee that an interest rate being offered today will remain available until you close on your new home? We will explain what a mortgage rate lock is, how it protects you, when you should lock your rate, and the options we provide at First Heritage Mortgage.
Table of Contents
- What is a Mortgage Rate Lock?
- How a Rate Lock Protects You
- When Should You Lock Your Rate?
- When Can a Rate Lock be Voided?
- How Do I Lock My Mortgage Rate?
WHAT IS A MORTGAGE RATE LOCK?
A mortgage rate lock is a guarantee from your lender to secure a specific interest rate for a given time period. This ensures you will have that rate when you get to your closing.
Typically rate locks are only offered once you have a fully ratified sales contract. This is because rate locks can only be offered for a limited amount of time. First Heritage Mortgage’s standard rate lock periods are 35 and 50 days. The loan must close prior to the deadline or the lock will be forfeited, unless an extension is done, which usually carries a fee.
HOW A RATE LOCK PROTECTS YOU
After you’ve signed your sales contract and obtained a mortgage rate lock, you’re protected from any interest rate increases. The only exceptions to this are if changes occur to your application, affecting your eligibility for the loan.
While you are then protected from higher rates, you also won’t get a lower rate. Some lenders may provide you a one-time option to “float down” your rate if market rates decrease, but this illustrates why locking in your rate when the best options are available is imperative.
WHEN SHOULD YOU LOCK YOUR RATE?
Once you are approved for a loan with an interest rate and monthly payment you are comfortable with, you should start thinking about locking your rate.
Rates will always go up and down. Focus on the things you can control.
- Be well-versed in the mortgage process
- Stay up-to-date on the market trends
- Seek advice from your loan officer
- Complete your prep work
- Ensure accuracy on your application
- Make sure there are no changes to your credit
WHEN CAN A RATE LOCK BE VOIDED?
Rate locks could be voided if your application changes. That could include changes to your income, employment, or credit score. It could also include appraisals that differ from what was expected. Revisions to the loan itself, such as the length or type of mortgage, will also trigger a new rate.
That’s why it’s important to control as many of these aspects as you can. Of course, you can’t control everything or prevent unforeseen circumstances, but having a thorough understanding of the mortgage process can help avoid some of these. Your loan officer can also offer their expertise and ensure you’ve got the information you need to make the best decision for your home financing.
HOW DO I LOCK MY MORTGAGE RATE?
With your ratified sales contract in hand and your loan application processed, your loan officer will guide you through the process of finalizing your mortgage rate lock.
Some lenders, like First Heritage Mortgage, also have extended rate lock programs that go beyond the typical 35 and 50 day periods. Our extended rate lock program gives buyers up to 360 days of a guaranteed interest rate.
The longer time frame will allow you to move through your mortgage process or finish your new home construction with ample time and peace of mind.
There’s no need to let the complexities of interest rates or changes in the economy get in the way of finding your new home.
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