Why Should You Lock In Your Mortgage Interest Rate?

By Sheryl Landrum
LoanPage.com Columnist

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Mortgage interest rates fluctuate daily. If you are buying a new home or refinancing your current mortgage, a fluctuation in mortgage interest rates can make or break your chances of an affordable home loan.

Discussing an interest rate and locking an interest rate on a home loan can easily be two separate items. When you discuss a new mortgage loan with a loan officer, always ask "what rate could you lock in for my new mortgage today?" Not only do you want to have a realistic interest rate for affordability purposes, but you want to be able to accurately compare different lender's offers of a current mortgage interest rate as well. Any lender can quote you a mortgage interest rate--you need to find what rate they could lock in today! When you talk to lenders, remember to ask them what their lock period is and if there is a price for the rate they are quoting you; make sure you get a Good Faith Estimate and a Truth-in-Lending Disclosure as well.

What if mortgage rates go down and you are locked in at a higher interest rate? Unfortunately, in today's market, most borrowers who wait too long before committing find that their home loan is now at a higher interest rate and their mortgage payment is higher. Ask your loan officer if you can switch to another lender if interest rates drop or if there is a float down option on your current lock. Remember, switching lenders works better for borrowers refinancing a mortgage than when there is a home purchase with a finite deadline for loan closure.

Remember, the expression: "put your money where your mouth is?" The equivalent in the mortgage industry is a mortgage interest rate lock!

About the Author
Sheryl Landrum is a Senior Loan Officer with Charter Funding, Inc. in Carlsbad, California and a freelance writer on mortgage issues.

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