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After researching
your home loan options and comparing a number of
different lenders you finally decide on
submitting a loan application. Now its time to talk
about locking an interest rate....
WAIT... BEFORE YOU
LOCK A RATE....
Every mortgage lender has very different guidelines
for locking a rate. There is no need to
get confused here since the act of locking an
interest rate is the same between all lenders.
As long as your loan application continues to
meet the parameters of the program you applied
for then you will be honored the lock should you
close and fund your new loan within the
timeframe of the original lock.
It's what can be done AFTER YOU LOCK
that you need to know.
What are you
options once an interest rate has been locked?
It's a commonly
known fact in the home loan industry that during
the average life cycle of a mortgage application
(30 days) interest rates rarely change by more
then 0.375%. For the most part, rates will
usually bounce around between 0.125 and 0.25% of
the rate you were quoted when you choose your
lender during this time. Many consumers
often feel a rush to watch bond rates and listen
to the Federal Chairman speak automatically
thinking their actions quickly change the
mortgage rate environment. More often than
not, these actions do change the rates but it's a slow
process and with the exception of the prime rate
(a rate that is more in line with home equity
payments than first mortgages) you will probably
end up chasing the same rate you began with.
Of course, there are many cases where if you had
waited to lock you would have received a better
rate but the same can be said for those who
received a worse rate. Keep your
enthusiasm for Las Vegas and
understand that it's much better to know your
rate in advance than to be surprised or forced
into a higher rate at closing.
Some lenders also
offer a Float
Down Option. This
feature provides a consumer with an
option to unlock their rate
one time during the
initial lock period and float to the current
market. There is a fee but it's on the
broker's side and if rates do drop by a quarter
(0.25%) or more then get on the phone and
request a float down. Not all lenders
offer this (nor are all brokers willing) but it's
very possible with many lenders. |
