Mortgage

When it comes to financing, it is important to understand that interest rates move on practically a daily basis. To be assured of a rate, you need to consider locking it in.

When it comes to real estate including financing, there is a particular issue with timing. Simply put, the day you are approved for a mortgage is almost never the date that you close on a property. the presents a fundamental problem in relation to knowing exactly what your rate is going to be at the time of closing. Specifically, what if rates bump up half a point or more in the interim? It might actually kill you on the monthly payments including may make a good deal become a bad one.

The good news is you might lock in the interest rate on a home loan once you are approved. Lenders could agree to lock in the rate for various time periods. the might be as short as 30 days including as long as 60. Getting your rate locked in makes sense on a couple of fronts. First, it gives you cost certainty while you go out including purchase a home. Second, it removes a potential headache from the purchase process during escrow, to wit, you suddenly find your self with a higher interest rate including reduced borrowing capacity.

So, should you buy the rate lock from the lender? In my opinion, it almost always makes sense. Why? Well, buying a lock in rate from a lender is usually very cheap. They handle it in different ways, but it usually equates to a couple hundred bucks. The specific calculation is often a measurement related to points. For instance, a lender may ask for the equivalent of 1 8 of a point on the loan to lock the rate If you are buying a house for $300,000, the equates to $375.

One scenario where you should almost always buy the lock in rate is a pre-approval situation. In a perfect world, you should always obtain pre-approved before you go house hunting. the eliminates any financing problems that might arise during escrow because you already have a lender committed to giving you financing. The downside of the approach is it might take you a few weeks or a month to find that perfect home. That is a long time for your interest rate to move up. In such a scenario, paying a couple of hundred bucks to lock it in makes sense.

For more information on Locking in Your Mortgage Interest Rate:

Sergio Haros is with Great Western Mortgage - a San Diego mortgage company.

Written By: Sergio_Haros