Things to Know Before Locking in Your Mortgage Loan Interest Rate

You, like many others, may have read about locking your mortgage loan's interest rate because there are certain companies that play the bait and switch routine where you find out the interest rate promised upfront has now been increased once the mortgage loan process is underway. 

So, it might seem that the obvious move here is to lock your interest rate, right?  Before you assume what may seem to be the obvious answer, let’s consider some of the pros and cons of doing so.

The Pros and Cons of Locking your Loan Rate

Let’s start with some good news. When you lock your interest rate on a mortgage loan, it guarantees you that rate for a fixed amount of time, which is usually no more than 90 days. However, for a small fee, you can usually extend the lock-in if there is some issue that has prolonged the mortgage process.

The locked rate guarantees you the offered rate that you chose to have locked and, in most cases, the cheapest rate will be one of the early offered rates.

This seems like a good way to go because, often, the interest rate might only increase as your loan documents pass through more hands in the company.

There are also some cons to consider. For instance, what happens when you lock your mortgage loan interest rate only to find out that the rates actually slipped even lower? 

While a tiny percentage drop isn’t a terrible loss, there are times where interest rates have taken quite a dip. These larger changes can make a significant change in your overall payment and savings over time, so this is when you need to think carefully about your next steps.

Don’t Panic! Have a Plan

Your first reaction should not be to panic. It’s understandable because so many people already feel so nervous about the mortgage loan and home buying processes. However, you can chose to opt out of the mortgage loan process with that lender if it will mean a considerable change.

Yet, today’s lenders are often on top of following interest rate fluctuations and can guide you before you lock in a rate. A smart lender who wants your business is often willing to renegotiate the loan to keep your mortgage loan in the pipeline, especially those companies that you’re your best interests at heart.

The bottom line is simple: locking your loan rate is recommended by many as a smart decision to make during your mortgage loan process, especially if you have a faithful and highly ethical mortgage lending partner who is guiding the process every step of the way.

Posted by Indigo Mortgage at 11:27 AM No comments: