A borrower’s mortgage interest rate indicates the annual cost to borrow money from their lender. The rate is expressed as a percentage and is paid on a monthly basis, along with the principal payment, until the loan is paid off – usually in 30 years.
Mortgage interest rates fluctuate depending on larger economic factors and market activity. A buyer’s unique financial situation also plays a major role in the rate they may qualify for. Things like a buyer’s credit score, credit history, debts, income, and other considerations all impact the rate a lender can provide.
Rates are set each business day, but they can also change during the day depending on several factors. Set up a quick call between your client and an FHM loan officer to see what rate they may qualify for. The loan officer can provide an accurate estimate after getting some Information from the client and understanding their specific needs.
A mortgage rate lock essentially freezes the current interest rate for a specific period of time. The lender guarantees (with a few exceptions) that the mortgage rate offered to a borrower will remain available to that borrower for a stated period of time. This is called “locking in” the rate. When a buyer locks in, they don’t have to worry about interest rates going up between the time they lock the rate and the rate expiration date.
Your client’s FHM loan officer will explain the rate lock periods available for their specific loan program to make sure their rate is locked long enough for their home to be completed and settlement to occur.
Many buyers opt to lock in their rate sooner rather than later, in order to protect themselves against fluctuations in the market. Normally, rate locks can only be done once a buyer has a fully ratified sales contract.
FHM offers a program called Lock & Shop, which allows buyers the option to lock in their interest rate for up to 360 days while they shop for their dream home. This could be a great option for buyers who are certain they want to purchase in your community and want to protect their rate while they take time to decide on which floorplan and lot are best for their needs. Consult your FHM loan officer for details.
Rate locks typically last from 30 to 50 days. The loan must close before the rate lock period ends. If the rate lock expires before the closing date, the rate lock will be forfeited unless the buyer pays an additional fee to extend the rate lock.
One way to get around this if you think the home will take longer to build is through an extended rate lock program, which offers rate lock periods of 120 days or more. FHM’s extended rate locks go up to 350 days for qualifying situations.