Locking in the Mortgage Rate

Just when you think you know how much your monthly payment will be, you find a perfect home, write the contract, qualify for the loan and wham! The mortgage interest rates go up.

Most lenders will not allow you to lock an interest rate until you have a signed contract for the home, but after that you usually have the option to lock in the current interest rate. Why do this? Because, as the well known idiom describes, “better the devil you know than the devil you don’t.” Interest rates could go down during your escrow period, but they could go up too, and sometimes dramatically so.

Interest rate locks have a time period of usually 30-45 days. Ask your lender what happens if you don’t close after the rate lock expires and determine with your real estate agent the likelihood of your closing date occurring past the rate lock expiration date.

Some lenders have a Float Down Rate Lock, which allows your interest rate to decrease if the index rates decrease, but it won’t increase above the rate lock amount. The catch is that you may have to pay for this privilege, but it might be worthwhile if current rates are varying greatly.