Locking in the rate...

Asked by Damien Samuel, 60640 Mon Mar 3, 2008

Given that mortgage rates have fluctuated quite heavily in the past month, what is your advice on locking in a rate? How early can you do lock in a rate? I plan on closing sometime between June and August... while I assume it's too early, when should I start looking?

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Jason Stiltn…, , 60657
Thu May 28, 2009
I'm a licensed mortgage banker located in Chicago Illinois with 10 years of trusted experience. Give me a call and I'd be happy to answer all your questions to ensure you're 100% comfortable with your new loan, whether that is with me or someone else. -Jason 312/738-8503
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Peter Thomps…, Mortgage Broker Or Lender, Lisle, IL
Wed Mar 5, 2008
Daniel, this is a great question. The first step is to find the property you intend to buy and get a contract. Once you have a contract you can lock in. If you aren't going to be closing until June or August you will need an extended rate lock.

Most lenders price their loans for delivery in 60 days or less. 90 days is also an option though the rate then goes a little higher. If you need to go longer than that you are in the extended area. These extended rate locks are usually used for disaster protection. With an extended lock you can lock into a "worst case" rate, somewhere slightly higher than the current 60 day rate, but you can relock at the current rate if it is lower once you are closer to your closing.

As you noted, mortgage rates are extremely volatile. Though I hope Patrick is right and rates fall back down to the 5.25% range, there's no guarantee that they will. The extended rate lock will protect you no matter which way rates go. If rates continue to rise, you are locked in to a maximum rate. If rates fall, you relock at the lower rate. There is usually a fee for these locks due up front, but the money will be applied to your costs at closing. With the market as crazy as it has been lately, I think it makes sense to hedge your bets rather than just hope for the best.
Web Reference:  http://ptmortgage.com/blog
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Mr.P, , Arizona
Mon Mar 3, 2008
The good news is that you have time. Tell your loan officer to lock you in a 30 year at or below 5.25%
That is where we were in early February. Let the loan officer do his job. If it takes two or three months , you`ve got time. Rates are coming back down. As for the length of the lock, some banks give 30 days, some 90 days. Ask for the length of the lock before you begin the paper work. I know asking for a 90 day lock is a lot, but you don`t get what you don`t ask for.

Now once you are able to lock in at 5.25%, so will everyone else, so get serious about buying when we approach 5.50%
Remember supply and demand, refi`s were up huge in early February, and resale`s showed some life.

Good Luck
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Damien Samuel, , 60640
Mon Mar 3, 2008
There is no contract. I suppose that's the first step, right?
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Jose Gomez, Agent, Miami, FL
Mon Mar 3, 2008
You mention closing sometime between June and August but you didn't mention whether you have a contract on a property already. Whether you do or don't, locking in a rate - simply put - is a gamble. If rates go down and you are locked in - you are stuck with your higher rate. If rates rise, as they did recently, then you gambled a lucky hand and have yourself a lower rate. What you need to do is talk to your mortgage representative and find out if there are penalties to reconfigure your package if you lock in and rates drop. Some banks have a waiting period before you can reapply. Others charge a fee to switch rates. All banks work differently. Now, here's something else to consider: If rates drop or rise a fraction of a point whether you have locked in or not is only a matter of a couple dollars a month. What you should find out from your lender is whether you can refinance soon after being issued your loan and what the charges are to do this. (Some banks just charge a reappraisal or processing fee.) So, if rates drop considerably after you close, you might find that refinancing within the year can save thousands over the long run. Again, all banks operate differently, so talk to your bank representative, ask questions and find out the details. Best of luck with your home buying adventure.
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