Mortgage Rate Locks
AnnieMac Education Center
The mortgage process contains a lot of steps that you may not be too familiar with. In this article, we are going to break down what a mortgage rate lock is and how it affects your home loan.
In summary, a mortgage rate lock essentially freezes your interest rate until your loan closing. Always lock in your rate if you are comfortable with the rate offered to you and if the monthly payment fits your budget.
Throughout everyday, mortgage rates increase and decrease frequently. To ensure that you will not get a higher mortgage rate than you can afford, lock it in when you first receive a rate to make sure your rate is not much higher than you expected at closing.
What is a mortgage rate lock?
A mortgage rate lock is an offer from a mortgage lender that guarantees the interest rate of your loan for a specified period. The lock period is usually from your initial loan approval date, through processing and underwriting, to your loan closing. Once your loan is locked, the loan's interest rate will not change unless you change your application details drastically. When you lock your rate, you are protected from higher rates but also cannot receive a lower rate.
The only way a rate lock can be voided is if the information provided on your application ends up changing, such as the property appraisal, your credit score, income, employment, or if their is a revision on the loan itself such as borrowing amount or loan length.
When should I lock my rate?
The best time to lock your mortgage rate is after you have shopped around for different lenders and are approved for a home. Make sure that you are happy with the rate you are given and are able to make the monthly payments before you lock in the rate.
How long does a mortgage rate lock last?
Lock periods can range from 30 days, 60 days or longer depending on when your closing is scheduled for. You can always ask your lender the expected time to loan closing and see how long you will need to lock in your loan.
Is a mortgage rate lock worth it?
There are many benefits to a rate lock and the benefits seem to outweigh the risks involved in many situations. A rate lock is not necessarily about getting the best deal on a home, but it is about protecting your homebuying power and ability to purchase a home. The best part about a rate lock is that it protects your mortgage payment from going up due to a rate spike before your closing.
In Conclusion
Overall, when shopping around for a mortgage, consider the current rates and lock in your rate as quickly as possible to secure that rate at closing. Talk to your lender about how their rate lock system works and how it can benefit your mortgage process.