How do you know if you have locked in your mortgage interest rate? The easy answer is your loan officer should send you a lock letter that you need to sign and return to them. As you are looking at buying or refinancing a home, you want to talk to your loan officer about when you should lock in your interest rate.
This is a discussion that I always have with my clients. I also tell them it is up to them when they lock in! I will give them as much advice as I can about rates and where they have been and where they seem to be going. The other comment I will give them is none of us know for sure what rates are going to do – if we did, we would be sitting on a beach or somewhere relaxing!! The only thing we know for sure is where rates are right now and what they have been doing.
This week rates were getting worse and then Wednesday afternoon the Federal Reserve Board announced that the economy had been slowing and they also said they would leave the quanitative easing program in place – that program has helped to keep interest rates lower. With those announcements, the bond market relaxed and we had several banks re-price rates better. However Friday will be the unemployment report for July and that could change the direction of interest rates again!
So with that, what should you do if you are buying a home? Talk to your lender and decide what is best for you. Rates have definitely gone up in the last couple of months. They are still really good, but not as low as they had been. If you are buying a home, you may want to lock in as soon as your purchase agreement is accepted. That way you know your rate is locked and you don't have to worry about what direction the market it going.
You do need to have a purchase agreement to lock your rate as lenders need the new property address for the lock. You can lock for 30, 45 or 60 days. In some cases you may be able to do a longer lock – especially if you are buying new construction. Remember the longer the lock, the more expensive. Even with a 30 or 45 day lock – usually there is about .125% difference in price (not rate but the price). So if today's rates are 4.25% with no points for a 30 day lock, it may cost you .125% for a 45 day lock.
If your locked rate expires, you lose that rate – so if you lock in your rate and your closing date changes, you want to make sure you get your rate extended before the lock expires. There is usually a fee to extend a lock, but it can be a lot more expensive to let your lock expire – especially if rates have increased!
I will tell clients to check in with me on a daily basis if they are not locked – I would rather have a daily phone call or email then have a client not realize rates have increased and they were not aware! If you do not like to gamble, you definitely want to lock as soon as you can. Talk to your loan officer and decide what is best for you. It is your decision when you want to lock, but you need to make sure your loan officer knows what your plan is.
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants – Email – Website
