Get Mortgage Quotes
New Articles - Oct '09
- When you're behind on mortgage payments
- Removing negative items from your credit report
- Mortgage advice for first-time home buyers
- The truth about free credit reports
- What is an interest rate cap on ARM loans?
- When do lenders check my credit score?
- Tax credit program may be extended soon
- Refinancing help for upside down mortgages
- What FICO score is needed these days?
- How to compare home loan offers
- Mortgage rejection and how you can avoid it
- Getting the best deal on a mortgage loan
- How to purchase your first house in 10 steps
- Beginner's guide to buying real estate
Mortgage & Credit >> Mortgage Process >> Locking In
Mortgage Interest Rate Lock - How & When to Lock It In
by Brandon Cornett
If you are applying for a fixed-rate mortgage loan, some time during the mortgage process you'll have to decide when to lock in your interest rate.
When to lock in an interest rate is an important financial decision that many home buyers lose sleep over.
But by understanding the process, you'll have an easier time making your decision.
Interest Rate Fluctuations
First and foremost, keep in mind why you are locking in your interest rate. While applying for a mortgage, the interest rates you are being quoted are based on the fluctuating rates of the federal government.
When the Federal Reserve raises or lowers interest rates, you'll see corresponding fluctuations in the rates offered by mortgage lenders.
Locking In Your Interest Rate
Locking in means you commit yourself and the lender to a specific interest rate. That interest rate will be the rate published by the lender on a specific date. If interest rates rise after your lock-in, you will still maintain your interest rate. Similarly, if interest rates decrease, you will still maintain the same interest rate you locked in at.
The Details of Locking In
When locking in your interest rate, many lenders will require you to pay a specific fee. So be sure to ask your mortgage representative what the bank's policy is on locking in. Also, remember that a lock-in is only good for a specified number of days. If you lock in too early, the lock-in may expire and you could be forced to pay additional fees to extend the rate (or lose the rate you locked in at). Get all the details up front.
Find Out Up Front
Most lenders will suggest you wait until you have a good idea of a closing date to prevent the lock-in from expiring. It's up to you, the home buyer, when to lock in the interest rate, but banks have their own individual guidelines as well. These guidelines may have an impact on which lender you choose, so ask about them well in advance of signing a loan application.
How to Lock In Your Rate
How you lock in your interest rate will differ from lender to lender, so make sure you know precisely how to go about it. Some lenders will require you to fax in a request on a specific form, some will request a general statement in writing, while others may accept a phone call. Even if your lender accepts verbal lock-in instructions you will want to follow it up with a fax, or some other written correspondence, to keep with your records.
Related Article: Mortgage Application Process
Brandon Cornett is the editor and publisher of Home Buying Institute.
