When a lender permits an extended lock-in period, the borrower will likely face a higher interest rate or additional fees that could be quoted as points. In other words, the borrower pays for the lender to take on the extended risk of being exposed to potential changes in the market. For example, let's say a 30-day rate lock commitment costs the borrower one-half point, while a 60-day rate lock commitment costs one full point. If the borrower in this scenario needed the extended lock period, but did not want to pay points, then an alternative would be to accept a slightly higher interest rate. In this case, a 60-day lock would typically have a higher interest rate than a 30-day lock. Our standard procedure is to lock in a rate as quickly as possible. My team and I want our clients to know that while interest rates fluctuate daily, most lenders do not want to lose any business because of it. If a significant rally causes interest rates to drop 0.25% or more, we know that we can most likely renegotiate the rate. In many cases, lenders prefer this option over losing the loan to another lender. On the other hand, if we'd allowed our clients to sit on the fence and not lock in their rate, we would have exposed them to market volatility without a safety net. Then, if rates were to increase, the borrower might no longer qualify for the loan they want - a situation that we want to avoid at all costs. By knowing our clients' needs and working intimately with them to make the right decisions early on, my team and I are proud to say that we have helped them to achieve their home ownership dreams. If you'd like to learn more about the loan programs we have available, please call me! |
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Interest Rates - When Is The Best Time To Lock?
4 comments • Karl Peidl - Accredited Loan Consultant • February 26 2009 09:38AM
I dont know about most people, but in my case, my crystal ball doesnt work great, so lock, lock and lock will rates are low,
James - I heard a line on tv last night that follows along with your comment: "Those who live by a crystal ball usually end up eating glass."
James, If you like the rate lock it. If everyone excited on how low the rates went today lock it.
If you think the rates have come down a lot over the past month, lock it. Else, take your chances.
Richard
Richard - I agree. Mainly, if the customer is happy with the current rate and payment, it's best to lock. I'd always prefer to have a customer that locked too early and then have rates drop than have a customer that waited too long and watched rates climb.