Simply The Best Loans

All new buyers getting their first mortgage want to know when to lock their interest rate. Even second and third homebuyers worry over when to lock. While there is not one definitive rule, there are some general guidelines you can follow, no matter what the market rates are doing.

First, most rate locks are for 30 days. Lenders will lock rates for longer periods but you will pay extra for locking your rate for an extended period of time. For instance, if you have contracted on a new construction that won’t be ready to close for 3 to 6 months, you may not save enough on the rate to make up what it will cost to lock it for the extended number of days.

One-time float down deals are good when the market is fluctuating a great deal, but again, you will pay extra for the opportunity to change the rate after you’ve locked-in.

Rates rarely fluctuate more than a half-point at any given time, more often, it changes only an eighth or a quarter of a point up or down. Your best bet, in my opinion, is to talk to your mortgage professional. Find out how much the rates are changing in any given time period. Make sure you’re looking at rates over the course of at least a week or two.

Once you’re within 30 days of closing, your loan officer should watch the rates closely each day and give you regular updates on if or how much the rates are changing. Rates tend to be highest on Mondays and Fridays and lowest mid-week. If there is not much change from day to day, it may be worth waiting until you’re within 15 days of closing to lock your rate. Lenders give a break on pricing at 15 days and, sometimes, another at 7 days. You can save as much as three-quarters of a point in a fluctuating rate market by waiting until closer to settlement to lock the rate. However, for buyers that have been approved with an interest rate cap in underwriting, it may be safer to lock at an approved rate as early as possible, usually within 30 days of settlement.

As with all things, timing is everything. By working with a mortgage professional that helps you understand and monitor current rate trends and changes within the market, you could save by waiting to lock-in your interest rate. Ultimately, unless you’re in a niche or subprime loan program with specific guidelines, when to lock your rate is your choice. A qualified mortgage professional can guide you in making the best choice for your loan circumstances.

This entry was posted on Monday, November 14th, 2005 at 8:13 pm and is filed under Interest Rate News, Residential Mortgages. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.