If you’re not a betting man, you may think that when you lock your mortgage rate it may be too much of a gamble, but a little can go a long way.
Shopping for a mortgage is a lot like playing the tables at Vegas: it’s going to take both luck and some skill. One mortgage game that you can try your luck in is called “mortgage rate lock.” But before you buy in at the table (or close on a home sale), learn the various situations in which you should lock in a mortgage rate to give you the best chances of winning.
- What is a mortgage rate lock? This is when you strike a deal with your lender that allows your mortgage rate to freeze for a certain amount of agreed upon days. If you don’t lock, your mortgage rate could change by the time the loan paperwork is finished being processed.
- Should you lock in your mortgage? This is where your gambling skills come into play. If you believe that your interest rates will rise, lock! If you think they’ll fall, don’t lock. But when interest rates are at historic lows (like they are now), it seems like a no-brainer to lock.
- Nothing is guaranteed. Read your lender; if you think they’re pushing you into locking, don’t be afraid to call their bluff. The lender has an incentive to get you to lock your mortgage. See, locking your mortgage isn’t “free.” The longer the duration of the lock, the greater the cost regarding basis points that are then shown in the mortgage rate. It may not cost anything upfront, but you will be charged a higher interest rate.
Contact Dean Rathbun when it comes time to finding the perfect plan of action to buy your home. We are happy to help you.