Your mortgage interest rate is a huge part of financing a home- a small change can make a big difference in your monthly mortgage payments. With the Fed making interest changes, high consumer demand, low supply, and many other environmental changes, this is also affecting mortgage rates.
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This being said, it is common to lock in a mortgage rate. We will discuss what a mortgage lock is and if it makes sense to lock in a rate in today’s environment.
What is a mortgage rate lock?
A mortgage rate lock simply keeps your mortgage interest rate from fluctuating. Mortgage rates fluctuate higher and lower daily, even hourly. From the time of applying for a mortgage to the time you close on a loan, the mortgage rate will likely change according to the market. A rate lock assures that your rate doesn’t fluctuate during the home buying process.
When a rate seems lower, and there are high chances of rates rising, you may choose to lock in the rate. Then, you can proceed without worrying about rates increasing. This allows for borrowers to get the best mortgage rate available throughout the homebuying process.
On the flip side, if you lock in a rate and rates go down you are not able to get the lower rate. Deciding when to lock should be a discussion with your loan officer, as they will guide you through and monitor the best decision. At Direct Mortgage Loans, we have a possible float down policy which allows you to get the lower rate even after locking a rate in. Contact a team member to learn more!
How do mortgage rates work?
When financing a home, you will make monthly mortgage payment. It is important to understand how these payments work and what they are made of. Part of this payment is repayment of the home and part of the payment is interest, taxes and insurance. Review this breakdown of a mortgage payment.
Many factors such as your credit history, down payment, financial portfolio, the economy, and more will determine your interest rate. Mortgage interest rates fluctuate constantly depending on the market. Some common factors that affect mortgage interest rates are:
- Federal rate changes
- Mortgage demand
How long can you lock in a rate?
The amount of time your rate is locked depends on your specific situation. Regardless, the rate will be locked for a specific time period. Your loan program, your location, and your mortgage lender are all factors that determine the amount of time your rate is locked. A general estimate for the time your rate will be locked is between 20 to 60 days.
At Direct Mortgage Loans, we have a new Lock-and-Look loan program that allows you to lock your rate for up to 90 days while you house hunt. This is a new, robust program and only offered by working with us!
If you have any questions about mortgage rates or the process, contact us today! For more homebuying information, consider enrolling in our completely FREE video course.
Eligibility and approval is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral and underwriting requirements. Direct Mortgage Loans, LLC is licensed in Maryland. Direct Mortgage Loans, LLC NMLS ID# is 832799 (www.nmlsconsumeraccess.org). Direct Mortgage Loans, LLC office is located at 11011 McCormick Rd Suite 400 Hunt Valley, MD 21031. This is a paid endorsement. Equal housing lender.