A mortgage rate lock is an assurance from a lender that they’ll give a loan applicant a specified interest rate, at a specific price, for a specified period. The loan’s price is usually expressed as “points” paid to acquire a particular interest rate.
A rate lock protects you from increasing interest rates. Therefore, if you lock in a 4% rate, you’ll only need to pay 4% interest in spite of increasing rates while going through the application process. At Nationwide home loans, we’re willing to discuss this option with you and help you make an informed decision.
Moreover, if you’re looking to secure the best rates, Fort Lauderdale reverse mortgage rates is the best place to start. Here’s what you should know about locked mortgage rates.
How to Shop for a Mortgage Lock
Locks are expensive, so you must look for the best contract terms and the lowest, calculated cost, which differ across lenders. A number of lenders require upfront lock fees while others obtain them at settlement.
You can expect flat fees, nonrefundable fees, and fees based on a proportion of the mortgage among different variations. While shopping, confirm whether the rate lock is from the mortgage lender, bank, credit union, or a different entity writing the loan and not a loan officer or broker. Bear in mind that a broker can acquire a rate lock from the lender but he or she can’t write the lock.
Benefits of Locking a Mortgage Rate
When you lock your rate with NHL lending, you can expect these benefits:
Peace of Mind
A rate lock is similar to an insurance policy whereby it offers a sense of security although you don’t use it always. If you pay to lock a rate with us, increasing interest rates won’t affect you. Therefore, the cost of your mortgage won’t change.
This is especially important in markets where interest rates are on a growing trend. We recommend you obtain a written lock-in from the lender as soon as you’re pleased with the negotiated terms.
Planning to purchase a home is demanding enough without altering interest rates. A higher rate could result in a considerable increase of monthly payments, driving that affordable mortgage out of reach.
With a rate-lock, you recognize the amount you’ll pay per month, allowing you to budget accordingly. This way, you’ll know how much you can afford toward a home without overstretching your money.
The Lock Contract
Since numerous variations exist on lock provisions, ensure the contract’s language provides the period and options that suit you best. Then obtain the agreement in writing. The agreement must comprise these details: the lock’s cost, effective date; expiration date, any post-lock choices, and the terms such as points and interest rate. When negotiating the terms, consider the following:
The time to lock
It’s best you lock the rate as soon as you see the desirable rate or when you apply for the loan initially. This way, you’ll have a locked rate as you spend time obtaining the approval of the application. That’s especially significant if you’re barely eligible at today’s rates.
Alternatively, you could opt to set the lock once you obtain the loan’s approval. This might be sensible where there’s prolonged loan processing because of a high housing demand.
Before selecting this period, establish the average time for processing a loan in your market. When you deal with us, we can approximate the time required to process your loan and confirm the information with other mortgage and realty professionals.
On average, locks can take 30 days but could range from 15-60 days. Longer is typically better. If the mortgage doesn’t close in a timely manner, lenders can prolong your lock at no cost, charge extra for an extension, or charge an extra proportion of the loan amount.
If you’ve been preapproved for a mortgage to buy a home but don’t have a complete sales agreement, you can’t lock a rate. Once you have a locked rate, it’s for a particular home. In the event that the sale falls through and you end up purchasing a different property, the lock becomes invalid.
Under no circumstances can you transfer a rate lock from one house to another; neither can you transfer it from one individual to another on a similar property.
With the increasing mortgage rates, homebuyers feel the need to consider locked mortgage rates to prevent their property’s loan interest from increasing before closing. If you’re contemplating this option but don’t know where to start, consider this guide.