Get the Best Mortgage with a Lock-in Rate

Rumor has it that mortgage rates will be on the rise this spring. To ensure that you get the best rate take a look at rate-locking.

A rate-lock or lock-in rate is a lender’s promise to hold a specified mortgage interest rate for a certain period of time, while your loan process. Understand that this not the same as a rate quote.  A quote is simply an estimate of what your rate will be. If interest rates change, your rate will change. Depending on where you are in the loan application process, other factors, such as income, loan-to-value ratio, and your credit rating may also cause the rate to change. A rate lock, however, is a legally binding promise that you will get a specified rate.

A rate-lock can be a gamble since there is always the chance that rates could go lower after you’ve locked in, however, in the current environment it could work out to your advantage.

To attain a lock-in you must have found a house to purchase. The rate lock-in simply holds the current rate while the lender prepares your loan, which could take a few days. Even a few days can make a big difference in your loan payments.

Usually the lender will promise to hold a certain interest rate and number of points for a given number of days, and to get these terms you must settle on the loan within that time period. Lock-ins of 30 to 60 days are com­mon. But some lenders may offer a lock-in for only a short period of time (for example, 7 days after your loan is approved) while some others might offer longer lock-ins (up to 120 days). Lenders that charge a lock-in fee may charge a higher fee for the longer lock-in period. Usually, the longer the period, the greater the fee will be.

According to Leslie Larson, Coors Credit Union Home Loan Consultant,  ” We (Coors Credit Union) offer 30 and 60day locks with no additional fees for 60 day lock.”

You could lose your lock-in rate if the lock-in period expires—even if it was beyond your control. Your loan approval could be delayed if the lender has to wait for any documents from you or from others such as employers, appraisers, termite inspectors, builders, and individuals selling the home. On occasion, lenders themselves are the cause of processing delays, particularly when loan demand is heavy. This sometimes happens when interest rates fall suddenly.

Coors Credit Union also offers a rate watch feature to help you keep up-to-date. Says Larson, “Our rate watch feature allows people to sign up for rate notifications via email. With this feature they’ll be sure to know when their desired rate is available.” 

When working with a rate-lock remember:
  • You’ll need a prospective property to lock-in
  • to obtain your lock-in agreement in writing
  • to ask about any fees
  • to find out if your lock-in includes points (PMI)

 


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