A mortgage rate lock is a lender’s promise to freeze your interest rate while your home loan is in process. The lock period usually applies throughout the stages of loan processing up to loan closing. Once you get a rate lock, you can rest assured that the interest rate for your Salt Lake City home loan won’t change regardless of any fluctuations in the market. This means you’re protected from higher rates, explains Altius Mortgage Group.
On the downside though, locking the interest rate also means that you won’t enjoy lower interest rates should mortgage market ebb favorably.
When should you lock in a rate?
Many borrowers obsess over when to lock in a home loan rate. Most worry that they might pull the trigger before rates sink even lower and this way, end up missing out on the thousands of dollars they’d have saved. Obsessing about trying to get the perfect timing to lock the rate is impossible. It’s like trying to predict the stock market.
Instead of torturing yourself with getting the perfect timing, you should rather consider where you are in the process of finding a home. Generally, the best time to lock the interest is once you’ve received a pre-approval from the lender.
How long can you lock in a mortgage rate?
Most lenders will offer 30- to 60-day lengths of rate locks. To cushion yourself, always select a longer lock period that allows plenty of time to closing. If you’re in a 45-day contract to purchase, locking the rate for 60 days will cushion you.
Shopping for a Mortgage Rate Lock
Locking an interest rate costs money. To get the best deal, shop around to identify the lowest and the most fairly calculated cost. Your lender may ask for the fees upfront or as a settlement. While shopping for the best rate lock, always verify that the rate lock is from a mortgage lender, bank, or credit union.
Mortgage rates fluctuate throughout the day. Basically, home loan rates can change through the entire application process. Knowing what a rate lock is, how long it can stay, and how to shop for one can save you a thousand dollars.