Mortgage rates have been rising pretty steadily over the last few months, so it is important that lenders lock in their customers’ rate. Although a difference of .5 percent may not seem like a lot, it is a big difference when it comes to a mortgage payment. Locking in an interest rate keeps it at where it was at that time of your initial mortgage application, even if it rises by the closing date. This will save you money.
Good mortgage originators know to lock in an interest rate, but, just as is the case with any profession, there are good mortgage originators and not-so-good mortgage originators. I know mortgage originators who will hustle on a Friday to get their customers locked-in on mere rumors that they will go up the following week, but then there are some who don’t even think about where interest rates will go.
Rates have been super-low for so long, changes in the rate didn’t have that much of a consequence. So mortgage originators haven’t been as cognizant of this as they were prior to the mortgage crisis several years ago. Therefore REALTORS® should to keep a sharper eye on mortgage rates and advise home buyers to speak to their lender about locking-in their rate.
Of course, banks will have different criteria as to when they can lock in a rate. For example, a bank may require that a home buyer have a fully executed offer before locking in a rate.
What if the mortgage rate drops again? Most lenders will honor the lower rate if that happens, but it is better to be safe than sorry and lock-in just in case they rise. Further, don’t assume that you are locked into a mortgage rate just because you have a preapproval letter in hand with a stated interest rate.
If you are planning on buying or selling a home in the Pioneer Valley, make your first call to Michael Seward at 413-531-7129.