When is the timing right to lock in your mortgage rate?
With a rate lock, lenders are obligated (with a few exceptions) to offer a home loan at an agreed-upon rate regardless of whether mortgage rates have changed between the time of the loan approval and the closing date.
Consumers looking for a mortgage who find a great mortgage rate typically choose to lock it in for a specified period of time. Todd Dal Porto, a national sales executive with Bank of America Home Loans, says most lenders offer a loan lock period of 30, 45, 60 or 90 days.
If you're shopping for a home loan, when is the best time to lock your mortgage rate?
"The time to lock in a loan depends completely on individual circumstances, so borrowers should work closely with their loan officer to make the decision," Dal Porto says.
When to lock?
The earliest point at which a borrower can lock in a loan is after the initial loan approval. However, many borrowers wait until they have found a home to purchase.
"The vast majority of homebuyers wait until they have a ratified contract to lock in their loan," says Brent Mendelson, a senior loan officer with Monarch Mortgage in Rockville, Md.
Borrowers typically wait because they don't know how many days it will take to find a home and have an offer accepted. They worry that by locking in too early, they may miss the opporunity for a better rate before they complete a purchase or get stuck paying extra to extend the lock once it expires.
In addition, a longer rate lock is more costly. For example, a borrower who chooses a 30-day lock on a loan may pay a 4.875 percent rate and zero points, while a 60-day lock might cost 1 point (equal to 1 percent of the loan) or a slightly higher rate with a half-point, Dal Porto says.