Picture this: You are in contact, the home loan has already been applied for, and you have provided your lender with the paperwork needed to verify your income, assets and credit. If you find yourself in a similar situation, you might be thinking, “when is a good time to lock my interest rate?” Provided your home will close within 30 days, you should lock your rate now!
There is a 3 day mandatory waiting period between locking your rate and drawing loan documents. If you wait too long to secure your rate, you could delay your closing. Mortgage interest rates are “risk based” and will depend on the loan amount, your FICO score, the percentage of down payment, the type of property, the ownership type (investor, second home, or primary residence), and the length of the lock.
The average time to lock a rate is 15 days, 30 days, 45 days, or 60 days. A lock beyond 60 days will come with an upfront fee and each lock period comes with a different cost or rate.
Your lender should be able to determine your rate after the first few days of gathering information and processing your loan. They should also decide the contract closing date and give you advice about the best time to lock your rate. Because rates are always rising and dropping from day-to-day, the sooner you secure your rate the better.
Once a rate is locked, it is difficult to “break the lock.” This works to your advantage if rates go up, but should rates drop, you will still have to remain at the rate you locked. Re-negotiating a locked rate is possible, especially if rates have dropped very quickly. However, expect to lose anywhere from 1/8 to 1/4 of the rate drop.
For more information click here or to for help securing a mortgage loan, contact me at:
- Learn When to Lock Your Interest Rate When Buying a Home - November 27, 2013
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