The most important factor in your mortgage may be the interest rate. The rate you pay on your mortgage will decide your monthly mortgage payment, as well as the total lifetime cost of your mortgage. Getting the best rate is crucial, and deciding the right time to lock your rate may help save you thousands of dollars over the lifetime of your mortgage.
Daily mortgage rates fluctuate, and 2018 has already seen the prime interest rate rise. With rates expected to rise again this year, as a prospective home buyer you may be thinking about where that leaves you. What will happen if you wait? When is the right time to lock my rate?
As mortgage rates increase, whether you’re a first time home buyer, planning on buying a new home, or looking to refinance an existing mortgage, it’s important to pay attention and follow the guidance from your lender. A higher rate means a higher mortgage payment, and that means more cash out of your pocket.
What if a lender could guarantee that the lower interest rate being offered today will remain available until you decide to purchase your new home? First Heritage Mortgage’s Chris Kelly walks through a mortgage rate lock, and the options you have available.
A higher rate means a higher mortgage payment, and that means more cash out of your pocket.
1. What is a mortgage rate lock?
A rate lock is a commitment from a lender to secure the interest rate locked in. Locking in an interest rate will guarantee that you will have that rate at closing.
Normally rate locks can only be done once a homebuyer has a fully ratified sales contract. This is because the rate lock is for a finite period of time. First Heritage’s normal rate lock periods are 35 and 50 days. The loan must close prior to the deadline or the lock will be forfeited unless a lock extension is done for a fee.
2. Why do I need to lock my rate?
The government’s ‘quantitative easing’ policy has ended. This was a policy where the government would buy Treasury bonds when the demand was low. The effect was to keep the rates low. This was done in order to spur the housing market. Since this program has ended, interest rates have risen and experts predict they will continue to rise.
3. When should I think about locking my rate? Is there a perfect time?
You should lock as soon as you have a ratified contract. Or you can do an extended rate lock to ensure you will have today’s rate when you go to settlement.
The homebuyer should ask about this if they are planning on buying in the next few months or if they have bought a new construction home that won’t be ready for a few months.
4. What should I ask my lender about a mortgage rate lock?
Simply ask if they offer an extended rate lock program. Not all lenders have an extended rate lock program. First Heritage has an extended rate lock program called Lock & Shop that allows prospective homebuyers to lock in a rate up to 240 days.
Lock and Shop will allow buyers to bypass the normal rate lock procedure and lock in the rate for an extended period of time before having a ratified contract. This will create peace of mind and should motivate potential buyers to find their new home.
With Lock & Shop from First Heritage Mortgage, home buyers can forget about the worry of rising interest rates, or the uncertainty that the future may hold. It’s important to focus on finding the right neighborhood, the right community, or the right house that you can eventually call home.
There’s no need to let the complexities of interest rates, the economy, or the uneasiness of what may or may not happen get in the way of you finding your new home.
For questions about Lock & Shop, or general questions, speak with one of our mortgage loan experts today!
Included content is intended for informational purposes only and should not be relied upon as professional advice. Consult with a mortgage professional to address your questions or concerns. This is an advertisement. Prepared 4/10/2018.