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When Should I Lock in My Mortgage Rate, and What Will it Cost to Do So?

When Should I Lock in My Mortgage Rate, and What Will it Cost to Do So?

Mortgage rates change on a pretty regular basis. This fluctuation means that if you're trying to iron out the details of your home loan agreement over several weeks, there's a good chance the market rate might change in that time frame. This variability can have a big impact on the terms of your overall loan, which is why many people lock their mortgage rate before heading into the final stages of home loan negotiation.

Here are the most common questions borrowers have about mortgage rate lock costs and timing:

How does a mortgage rate lock work?

This is a smart question that every potential homeowner should know the answer to saving time and money in the closing process. A mortgage rate lock is a process that fixes your mortgage rate at an agreed upon number and freezes it there despite market fluctuations. The mortgage rate lock is valid for a specified period, allowing borrowers to finalize their loan agreement without fear of a spike in mortgage rate costs at the eleventh hour.

When should I lock down my mortgage rate?

The rate lock is available right after the initial loan approval, at the earliest. However, it works to the advantage of most buyers to wait until they find a house. Once a mortgage rate lock expires, you will have to pay again to enact the hold on possible rates, and that can get pricey - the longer a mortgage rate lock lasts, the more expensive the fees. But if you time your rate lock correctly, you will have enough time to finalize the terms of the loan on the house of your dreams effectively.

Posted Feb 03, 2016 by Midland Mortgage Corporation