Lock Rate is a guarantee from a lender to keep the interest rate promised for a specific deal for certain amount of time. You will be assured that the rate on your investment will not increase during that period. In order to be eligible to lock in your rates on a specific deal, you must provide the documents requested by lender to ensure your commitment.
Lock Rate may vary based on the mortgage lender that you do business with. The law and regulations for locking in a rate may also be slightly different based on the state that you live in. Locking in your rate can help you save money and increase your buying power, not to mention that you could get a better deal as rates fluctuate. However, you should also consider the fact that those rates can drop during the lock-in period.
How to Plan
If you know that the current interest rates are low, the first step you need to do is fill out a mortgage application to start your mortgage process and ensure that the interest rate on your loan stays the same throughout the loan process until closing. Locking a rate ensures that the rate will not change, so that you know what to expect as far as handling your budget.
The important part about interest rate is that it can influence the cost of financing. A small adjustment to the rate could cause you to spend thousands of dollars over time. The lock period prevents this from occurring.
How Long Is Lock Rate Period?
The lock period can last for 30, 45 or 60 days in most cases. This amount of time should be enough to go over the budget as well as reviewing purchase contract for the property that you are interested in the most. You may be eligible to extend the time before the period expires.
A lock-in period may come with an added cost. The lock may be worth about 0.25 percent of your loan value. You’ll have to see that the interest payments you make on your locked-in rate are sensible versus the alternative to ensure the lock-in effort is worthwhile.
To ensure your success when using residential lending services in the united states, you must agree to the terms during the lock rate period to ensure purchasing or refinancing the subject property at the same rate that you are locked in for.
Review Prime Interest Rate
You should review the prime mortgage rate nationally to make sure you picked the right time to lock in your rates. Best-case scenario entails an interest rate going up during this period. This means that the rate you have locked into is less than what the current rate is, thus giving you a better deal.
What If Rates Go Down?
You should also note what might happen when rates go down. A rate might drop before you close your loan with a locked-in rate. You might have a float down option for your lock. But a float down option typically works only for long-term loans and high-value investments. You may only allow the rate to float down once during the period.
The best part about a locked-in rate is that it ensures your homebuying power stays intact. You should always do your research to see the flow of the interest rate change. If you have any questions regarding how locking in rates works, you can contact a mortgage specialist at Real Estate Funding Solutions to answer your questions. Real Estate Funding Solutions offers competitive mortgage rates in 50 states across the united states. You can contact one of our mortgage lenders by scheduling a call or you can email us your questions and one of our team members will get back to you with your answers within 24 hours.