How to Know When to Lock in Your Mortgage Interest Rate

 

What is a mortgage interest rate and when to lock it in?

One of the biggest misconceptions in the mortgage process is when you can lock-in your interest rate. The mortgage rate lock is the agreed upon guarantee by your lender for a certain interest rate for a specified period of time. The mortgage rate lock freezes your interest rate until your loan closing. 

Once locked-in, your interest rate will not change for the term of the loan (if it is a fixed term rate and not an adjustable rate mortgage), so you are protected from rates increasing.

The interest rate for your mortgage will ultimately define how much interest you will pay over the life of the loan term. Consequently, the lower the interest, the lesser interest paid, the better. 

When should you lock in a mortgage rate? 

Throughout the pre-qualification process along with home shopping, you are provided with worksheets/estimates for properties you are interested in. These worksheets are only estimates and examples of rates usually at that specific time the worksheet is done.

Rates change constantly, at multiple times during the same day, so predicting home loan interest rates can be very difficult as the market so often fluctuates depending sometimes on what is going on all over the world.

You should lock-in when you are at comfortable rate that is within your budget for monthly payment. But as one of the biggest misconceptions, you usually cannot lock-in to an interest rate until you are under agreement on a property (the few programs that allow this are usually at a premium price!).

A lock-in cannot not be done prior to an accepted agreement of sale. Therefore, when you are sent worksheets on properties you are interested in, these are only estimates and you are not officially locked-in to that rate. While you may be able to still get that estimated rate (or lower depending on that day in the market), an interest rate lock-in is exclusively tied to a property address, so it cannot be locked on a to be determined address or transferred to another property. 

It is of utmost importance that once you are under agreement, you let your lender know so they can best advise you on the current market rates and discuss when you should consider locking in.




Article Written By: Kevin Berju, Branch Manager AFN

www.PhillyMortgageTeam.com 215-681-3587

American Financial Network NMLS # 137213


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Kevin Berju starts Philly Mortgage Team with over 25 years in the mortgage industry. Prior to working with residential and commercial mortgages, Kevin graduated with a business degree from Temple University, owned his own business, and worked as an agent for years in both commercial & residential Real Estate. With Kevin’s diverse knowledge of the real estate and mortgage industries, his clients are thoroughly guided throughout their home buying or refinance process. As a result of his knowledge, attention to detail, responsiveness to his clients, and exceptional work ethic, Kevin was awarded the Five Star Mortgage Professional recognition in Philadelphia Magazine for the past successive years as well as reaching the top 1% of all originators country wide since 2012 as designated by Mortgage Executive magazine.

As a mortgage professional for over 2 decades, Kevin is an invaluable resource for both first-time and experienced home buyers. With his accomplishment of the Certified Mortgage Planning Specialist designation, Kevin is placed in an elite group of the top 5% of mortgage professionals in the industry. Looking to Purchase or Refinance in Pennsylvania, New Jersey, or Florida? Kevin Berju is the Lender for You!


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