Whether you are buying a new home of planning on refinancing your existing mortgage, it is common that your lender may require you to lock your rate on the amount that you are borrowing no later than five days prior to closing on your loan. Mortgage rate locks are designed to guarantee the interest rate for a specific amount of time. The length that you are able to lock in typically determines how long you have before you must close escrow. It is during this time that prospective home buyers or those attempting to refinance their loans may start scrambling in order to meet the time deadline so that costs don’t start accumulating.
When it comes to mortgage rate locks there are many different options available to you. These mortgage rate locks tend to vary in time length. The first option that is available to you is a 15-day lock; this option tends to provide the lowest cost rate that is available in the market on that day. In order to take advantage of this option your loan needs to be approved first. The second option available is a 30-day lock; this option represents the fair market rate. This option is more commonly used for interest rate locking before your loan is approved.
The third option that is available to you is a 45-day lock. This option tends to be used when transactions are taking longer than normal whether the loan has been approved or is still awaiting approval. The final mortgage rate lock option is that of a 60-day lock. This option is used in where situations have caused the deal to become prolonged. An example of this can be when a borrower may be out of town for an extended period of time. The shorter the mortgage rate lock is the less risk that is placed on the lender which in turn, can result in a better interest rate for the borrower.
When shopping for a home mortgage don’t be afraid to shop around. If you find that a lender is offering you a lower interest rate on the amount you are looking to borrow, don’t hesitate to lock that rate down if you feel that it is reasonable and fair to you. Mortgage lenders know that many borrowers shop around to find the best rate possible; this has forced them to become more competitive in order to stay in business. When purchasing a home for the first time, it is okay to shop around for different lenders, just because your agent may suggest someone for you to work with doesn’t mean that you are obligated to do so.