As with any purchase you make, you want the best value possible. Value is a combination of professional advice, service and price. With a mortgage, the price is a combination of interest rate and points. The interest rate is the amount charged by a lender to a borrower for the use of assets. Points, or origination fees, are charged by the lender for an interest rate that is below the par rate. Points may be paid by the borrower or seller at closing, depending on what you negotiated in the purchase agreement. One point equals one percent of the loan amount.
Interest rates and points fluctuate based on the markets. Rates can change daily, or even midday in highly volatile economic times. So rates and charges could be higher on the day you actually close versus the day that you started the application process. The way to ensure you get the rate and points you want is to lock in the rate at some point in the process.
A lock-in also called a rate lock or a rate commitment is a lender’s promise to hold for you a specific interest rate and a specific number of points, typically for a stated period of time, while your loan application is processed. There are different programs and time periods offered and lock in requirements vary by state and lender. Locking in a rate will ensure your mortgage cost stays within your budget as long as your loan closes and funds within the locked time frame.
If you haven’t obtained a home loan in the last few years, you may not realize that interest rates vary based on a variety of factors that include credit score, loan to value, type of property, type of occupancy, etc. These factors can alter the interest rate available, and what you can qualify for. There’s no time like today to get a prequalification going so that you know what you can expect on interest rates and your monthly payment.
If you have questions regarding our lock-in terms and /or today’s interest rates, give us a call!