So what do you prefer, something certain, a rate on a home loan that is fixed, while you hunt for a home? Or would you prefer to take the chance and wait until you have found the right home to live in before you worry about the interest that you will pay on your home loan?
These can be tricky questions as a small deviation of interest rates one way or the other are likely to have a major impact on the affordability of your new home. That doesn’t mean you will loose everything but fifty or one hundred dollars more or less in a monthly budget can make a difference if times are a little lean.
Is That A Bird In Your Hand Or A Snake?
If interest rates are rising, and look like they will be even higher by the time you have selected your purchase by agreeing on a mortgage lock, you can protect the rates available now by choosing a lender who will offer to lock your interest rate in now, for when you finally get to close the deal.
Banks and mortgage lenders use the offer of locking in your rate as a way to get business moving. It is a risk for them as much as you, except reversed; they lose if rates go up and win if they go down, when you have locked in your mortgage rate.
How Long Is Your Piece Of String?
The problem with agreeing to a locked rate is that you never know how long it could take to find the right home. You could get into closing and find a cloud on the title that makes it impossible to complete the purchase. Or the seller might choose an offer they like better after protracted negotiations. Sometimes the house that suits you best just doesn’t come onto the market for a long time.
Mortgage Lock Basics In Summary
If you are worried about losing out on a rate lock you might rush to a decision more than you would do in perfect circumstances. So there may be other factors to think about besides the rate you can lock in and what interest rates are doing.
However, if you prefer to know now what the numbers are going to be in the future, now, you might sleep better if you have this side of one of the most stressful things that a consumer can commit to tied down with a mortgage rate lock.