If you’re shopping around for a home loan, you probably are wondering, When is the best time for me to lock in my interest rate?

Or maybe you’ve never heard of “locking in” interest rates, so let me explain: Interest rates fluctuate from day to day (even throughout the course of the day), and your interest rate on your mortgage could change while you are looking at new homes and going through the Mortgage Process.

But you can lock it.

What Are My Options?

There are all kinds of programs out there. Some will claim that you can “lock and shop” with no charge, meaning that you can lock it in for one year or even 10 years. That may be unrealistic. Remember, we are dealing with Wall Street — that’s where the money comes from. And Wall Street is not going to do me a favor and it’s not going to do you a favor. …I hate saying it, but that’s the honest truth.

However, I am going to do you a favor. Whenever we lock in a rate during the processing of your loan, assuring you that rate at closing day, that is money that’s being reserved in your name. It protects you against the ups and downs of the market so that we can get your loan processed.

How Long Can I Lock In My Interest Rate?

The typical lock-in period is 30 days. However, you can lock it in longer than that. The next available point is 45 days. Then you can get 60 days, 90 days, 180, and even 360 days. You probably only need such a long period if you’re building a new home.

One thing to keep in mind is that the longer your lock-in period, the more volatile the market could be. Wall Street knows that. A longer lock-in period means a more expensive rate lock, either in the rate itself (should rates go down significantly during your lock-in period) or in the fees that you’ll be required to pay upfront.

A lot of online lenders will quote a really low rate. Then you read in the fine print that it’s for a 10-day lock — but you can’t process a loan in 10 days! The average lock-in period is 30 days, because that’s about how long it takes most lenders to process a loan. We can always request an extension if needed, although the market is usually going to charge you for it. …Remember, it’s not always the lender’s decision. This is the market we’re dealing with!

Variables to Consider

If I were building a home, I would weigh the date I think the home is going to be ready against what I think the market volatility is going to be between now and then.

If you’ve stumbled upon a house you love but it’s only partially complete — say it’s going to take 60 to 90 days — oftentimes the lender will “float” the rate, which means it’s not locked until you get within 30 or 45 days to closing. That is a much cheaper rate lock, and as long as rates haven’t significantly increased, it’s not really going to cost you anything to do it that way.

Before You Decide

If you want to come talk to us about it, there are a few things we need before we can lock in your rate. You do need a contract. You do need to know your closing date. Then we can advise you on when we think it would be best for you to lock in your mortgage rate.

Remember, a lender does not have a crystal ball. If they truly knew whether interest rates were going to go up or down, they sure wouldn’t be a lender any longer — they would be making big money on Wall Street! So anybody giving you hard and fast advice, keep in mind it’s just that — it’s advice — and they don’t truly know.

Once again, we’re here whenever you need us. One of our jobs is to educate you, and we’re glad to do it. So reach out to anybody on our team at 205–986–4220. Connect with us on social media. Hit us up on our website. There you can download our mobile app to get information on house payments or even use the home search. Just let us know whenever you’re ready. We’ll be happy to help any way that we can.

Ben Chenault,
Certified Mortgage Planner
NMLS# 130305
MortgageBanc / Fairway Nmls# 2289

Fairway Independent Mortgage Corporation is not a credit counseling agency and will not provide credit advice. Please consult a professional regarding your specific credit situation.

Copyright©2019 Fairway Independent Mortgage Corporation doing business as MortgageBanc. NMLS#2289.4750 S. Biltmore Lane, Madison, WI 53718, 1–866–912–4800. All rights reserved. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Lender. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, License No 41DBO-78367. Licensed by the Department of Business Oversight under the California Finance Lenders Law, NMLS #2289. Loans made or arranged pursuant to a California Residential Mortgage Lending Act License. Georgia Residential Mortgage Licensee #21158. Licensed Nevada Mortgage Lender.

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