When you’re purchasing a new home, it’s easy to get fixated on shopping for the best possible rate. Why? Because just a small rate decrease can lower your monthly mortgage payment and save you some cash! But what if you get prequalified with an attractive rate, and it goes up before you seal the deal on your home? That’s where mortgage rate locks come in. Here’s a closer look at mortgage interest rate locks and how one may help you!
1) What is a Mortgage Interest Rate Lock?
A mortgage rate lock is a service that mortgage companies (like OVM Financial) offer home buyers so you can “lock-in” and guarantee your mortgage rate will stay the same for a disclosed period of time. Most mortgage rate lock agreements are for 30 to 60 days — enough time for the mortgage application and closing to take place.
The easiest way to understand a mortgage rate lock is to think about it in the context of the market. If interest rates:
- Go up: You are guaranteed the lower rate that you locked in. You are protected from being charged at a higher rate.
- Stay the same: Nothing happens – You will get the rate you received anyways.
- Go down: While it can be frustrating to lock in a rate right before a lower rate comes along, locking your rate saves yourself the stress of uncertainty during the house hunting and closing process. It’s far more concerning to wait until the last minute to lock and miss out on a great rate than it is to flow with uncertainty. Plus, you can always refinance when rates lower. So, you’re never really locked into a rate for life.
2) How Does A Rate Lock Work?
When you get your house under contract, you can lock your rate. If the home’s sale depends upon the outcome of the home inspection, complete the inspection first to make sure you’re going to move forward.
Once you move past the steps above, your loan officer will let you lock your rate. We keep a close eye on market conditions to advise you on timing. Trust your loan officer’s expertise; they will help you get the best possible rate. If we can help you score a better rate, you’ll return to us for help in the future.
3) Can a Mortgage Lock Change If There’s A Lower Rate Available?
Unfortunately, the answer here is no. Mortgage locks are a deal in which both parties are taking a risk. However, don’t stress if a lower rate becomes available. Your relationship with your loan officer doesn’t end after you close. We can help you refinance when a lower rate is available.
4) Does It Cost Anything To Lock in My Rate?
We do not charge our clients to lock their rate. Before you select a mortgage company, be sure to ask upfront about the lender’s policy. Not all mortgage lenders waive this cost.
5) How Long Is A Rate Lock Good For?
OVM Financial’s rate locks are generally good for 30-45 days. This allows time for finding a home, processing the mortgage, and closing. However, lenders may offer rate locks for different periods of time, such as 10, 15, 45, or even 90 days. By allowing rates to be locked for varying time periods, lenders can accommodate all types of mortgage loans — including construction loans.
More Questions About Mortgage Interest Rate Locks?
By choosing a lender that offers mortgage rate locks, you can protect yourself from a market that fluctuates daily, especially if rates are predicted to go up soon.
To learn more about mortgage rate locks and how they may benefit you, contact our team at OVM. As always, we are here to answer any lingering questions that you may have and will gladly guide you through the rate lock process.
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