Does my mortgage need a rate lock?

  • Mortgage
  • November 13, 2017
  • FCU Team

If you're on the market for a house now, you've probably encountered the phrase "lock in a rate." A rate lock is an agreement by a lender to ensure a rate on a loan for a set period of time. This means the closing date, the "points," duration, and interest rate of your loan will remain the same, no matter what the mortgage market does before your loan closes. The lock agreement is valid until a few days after your expected closing date to account for any potential complications, and can only be rejected if some serious error emerges during your qualification process.

Why should I lock my interest rate?

Locking your interest rate doesn't mean you'll score a big deal on your loan, but it does help your mortgage buying process in two big ways:  it helps you prepare your new monthly budget, and it helps your financier get all the necessary paperwork in order for closing.

When should I get a rate lock?

Rate lock agreements are usually offered for 30, 60 or 90 days. The longer term locks may seem like a good idea, but they usually come with higher origination fees. For instance, a 30-day rate lock might establish a 4.00% interest rate with a quarter point (or 0.25% of the value of the loan). A 60-day lock on that same loan might include a half point instead (0.50% of the loan). On the other hand, ignoring your mortgage rate until the day before closing is also a poor choice. Your lender needs time to put together the paperwork for your loan. Ideally, you should get a rate lock sometime between a week and a month before you close.

How do I lock my rate?

Locking your rate is easy: once you've found the right house and you're ready to make the commitment, notify your lender that you're ready to lock your rate. After signing an agreement for the rate, points and duration, you're ready to go.

If you're just getting started in the mortgage process, reach out to us at Florida Credit Union. Our supportive staff is there to help you every step of the way, from setting a budget, to establishing your pre-approval, to protecting your biggest investment. Call, email, or click your way to Florida Credit Union today!

Did you like this article? Check out another Smart Money Advice piece: ' Financial Empowerment: Influencing Your Interest Rate

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