Your Interest Rate Lock Questions Answered
December 3, 2018
What is a rate lock?A rate lock is the action of locking in, or reserving, an interest rate for a home loan. Locking in your interest rate guarantees the agreed upon rate under the agreed upon conditions for a certain amount of time.
Will my rate ever change after a rate lock?A rate lock guarantees an interest rate for a certain amount of time, usually 30 to 60 days but sometimes longer. Rate locks can also be extended but you may be required to pay a fee (usually expressed as a point, or percent of the loan amount). During the time your rate lock is valid, your rate will not change – that’s the whole point! A notable exception: if something changes on the loan application, or there are errors in your personal, employment, or income information, your rate lock will no longer apply and your rate may change. What makes a rate lock helpful is that even in a rising rate market, you’re guaranteed a set rate for a set amount of time. This lets you be confident in your budget and the loan process.
When should I lock my interest rate?We always suggest potential home buyers get pre-approved before they begin shopping for a home. Your preapproval checks your income, employment, assets, etc. and provides a rate that you may qualify for. If you’re happy with this rate and the monthly payments with this interest rate fit into your budget, we suggest locking your rate right when you are pre-approved. If you haven’t found a home at the time you lock your rate, that’s ok. You may be able to extend your lock and buy yourself a little more time.
Still have questions about rates? Schedule a free home buyer consultation today!