The Right Time to Lock in a Mortgage Rate

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Author: Leslie Silver

All the major indicators in the financial and housing sectors point to this being the right time to lock in a great mortgage rate for yourself. Interest rates may never again be as low as they are right now and they could rise to previous or even higher levels as soon as next week. That’s the way the market works and so you will need to work fast to take advantage of these extraordinarily interest rates to lock in your mortgage rate before they change. Of course, interest rates vary just as they always have among the various types of mortgages such as adjustable and fixed rate mortgages. You should explore different types of mortgages and the rates available before choosing the right one for you.

If you are already in the process of getting a mortgage, you can lock in your rate several weeks in advance of the closing date and can even do so on the closing day on your mortgage. The closing process for mortgages typically takes from 30 to 45 days to complete.

How do you go about locking in the best rate for yourself on a mortgage? Most home purchases are required to sign a purchase agreement on a home and pay at least five-percent towards the purchase price before they can lock in low rates on a mortgage. After you have signed a purchase agreement and paid five percent down on the purchase price of the home, you can ask your mortgage lender to lock in the rate on the mortgage you have qualified for through them.

Some lenders will allow a borrower to lock in a mortgage rate even when they have not yet signed a purchasing agreement on a home. A few may not charge a fee under these circumstances however other lenders may asses up to 2 percent of the total mortgage loan to home purchasers requesting a locked rate who have not signed purchasing agreements yet. You should ask your mortgage lender the length of time that you can ‘lock’ the rate on a mortgage, how much (if any) that you will be charged for locking in your rate, and also inquire about the penalty fees you will have to pay if you decide to back out of your mortgage agreement before it has been closed on.

Furthermore, ask if any of the money you have paid such as an application fee will be returned to you, in the event that you change your mind about agreeing to the mortgage loan offered to you. As with any other business transaction you make, you should always protect yourself by having all agreements documented on paper so that you can have it on hand in case a dispute arises.

Why lock in the rate on a mortgage? To avoid the fluctuations in mortgage interest rates that can raise the overall costs of a mortgage significantly. When you find a mortgage rate you are happy with, lock it in before the opportunity to do so disappear as interest rates increase. Otherwise, you may only be able to find mortgages with high interest rates that you may not be able to purchase enough of to cover the full costs of the home you wish to purchase.

You should call your mortgage lender at least 7 days prior to the closing to make sure that your rate is ‘locked’ on your mortgage. Assuming that it is without confining it with your lender could mean that you do not get the rate on your mortgage that you were expecting.

A possible caveat to locking in a mortgage rate now is that mortgage interest rates could fall even lower and you would be stuck paying the higher rate that you have agreed to. By most accounts from top financial analysts, it is highly unlikely that rates will drop lower so you are probably safe in locking your mortgage in now without worrying that rates will decrease further.

Low interest rates on mortgages make this a good time to refinance a mortgage now as well. Shop around to get several rate quotes to make sure that you are getting the best rate possible to refinance your mortgage. There are multitudes of refinancing options available to home owners right now that may help to lower your mortgage payments and help you to own your home sooner.

There has never been a better time to lock in a mortgage rate than there is right now and it is not likely to happen again. The steps now being put in place to prevent markets from failing again in the future will make them stronger and benefit us all over the long run. However, people may not be able to save as much money on their mortgage rates when that does finally happen.

Leslie Silver is a freelance writer who offers information about how to refinance home loan.