What Is A Good Mortgage Rate
Itâs difficult to advise when you should lock your mortgage rate as they can fluctuate from day-to-day, and the mortgage rate youâll receive depends on your and other factors as well. Nobody can predict when mortgage rates will rise or fall even renowned economists and financial advisors make inaccurate predictions. The best that you can do to ensure a competitive rate is to research the recent history of mortgage rates in your area, discover if mortgage rates are rising or falling, and lock in the rate you as soon as you feel ready.
Tips For Locking In A Mortgage Rate
Here are some quick tips to help your mortgage rate lock.
- Shop around for your mortgage loan and rate lock. Different lenders have different policies, so make sure to check out their policies around locks.
- Know your financial status. Howâs your credit score? Do you know your debt-to-income ? Whatâs your monthly mortgage budget?
- Nobody wants to spend the time and money locking in a rate only to find that it has expired before their loan has processed. Make sure you get a rate lock for an appropriate length of time.
Are Helocs A Good Idea Right Now
Many homeowners gained a lot of equity over that past couple of years as home prices increased at an unprecedented rate. But because rates are so high now, tapping into that equity can be expensive.
For homeowners looking to leverage their home’s value to cover a big purchase such as a home renovation a home equity line of credit may still be a good option.
A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum.
Depending on your finances and the type of HELOC you get, you may be able to get a better rate with a HELOC than you would with a home equity loan or a cash-out refinance. Just keep in mind that HELOC rates are variable, so if rates start to trend up further, yours will likely increase, as well.
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Can I Return My Loan To A Floating Interest Rate
If your closing date becomes unknown or uncertain and it wont occur on or before the rate lock expiration date, you may have the option to unlock and float your rate.
Some common reasons for an unknown or uncertain closing date may include circumstances such as:
- Departure home sale falls through
- Legal action pending on the purchase property title
You can relock in 14 calendar days or less at your original rate and loan terms.
- If you relock after 14 calendar days, youll receive a new current market interest rate and rate lock expiration date.
There is no fee to return your loan to float.
If you believe you have an unknown or uncertain closing date, please contact your home mortgage consultant or private mortgage banker.
Note: If you’re using a Bond program and your rate lock expires, returning to float is not available. Contact your home mortgage consultant with any questions.
Lenders Will Ask You For Proof Of Your Income
Lenders will expect you to verify your income by providing various documents, such as pay slips and self-assessment tax returns. This is a key part of the process, and if the amount you earn on your payslip or tax return is different to what you have disclosed in your application, it can mean that the lender will change the amount you can borrow. So, its important to make sure you get this right.
Finally, while most lenders will ask you for your income before tax , theyll take off tax and National Insurance contributions as part of their affordability assessment.
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Can My Loan Officer Give Me Good Advice On Whether Todays The Day To Lock My Rate
Great question. Unfortunately, the answers usually no. They may know more about the trends than you do, given that theyre paying attention to the rates daily. But most of them have no idea whether rates will be lower or higher tomorrow than they are right now. You can ask, but they probably cant help you.
When Should You Lock A Mortgage Rate
The time to lock in the mortgage rate is after you’ve shopped lenders and are approved for a home loan. That loan should have a rate you feel comfortable with and a resulting monthly payment that fits your budget.
Don’t drive yourself crazy by trying to forecast mortgage interest rates, which can be up one day and down the next. Even noted economists can’t predict rates with 100% accuracy because events that shape the economy and impact rates are unpredictable.
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When Can You Lock In A Mortgage Rate
When locking your mortgage loans interest rate, you can choose to secure it from the moment you receive initial loan approval to 5 days before the closing. Some lenders may even lock your rate at the same time they send you the loan estimate. However, your rate lock will have an expiration date, after which your interest rate will start to increase or decrease even if you havent completed your refinance or home purchase.
Thats why its essential to time your mortgage rate lock correctly to ensure you have a lower interest rate and APR for your new mortgage.
Unlike most rate lock options, RateShield® allows you to lock your rate for up to 90 days while you shop for a home with a one-time option to lower your rate if they fall during that period.
To know whether you should lock your rate right away, you may want to do some research to find out how rates have been acting. If rates have been rising, it might be best to lock your rate as soon as your mortgage or refinance is approved. If rates are on the decline, floating your rate could pay off.
Just keep in mind that no one can predict what rates will do. Floating your rate can be risky even a small increase in interest rates can cost you thousands of dollars over the life of your loan.
Lock your low rate today!
Get approved before interest rates continue to rise.
How Long Can A Rate Be Locked
The answer depends on your mortgage lender. While 30-day and 60-day rate locks are the norm, you might be able to find significantly longer options that stretch closer to a full year.
Of course, you might have to pay a higher fee for a longer lock. In some cases, that can be an easily justified cost, though. For borrowers of construction loans, for instance, paying for an eight-month rate lock might save them money in the long run, especially as interest rates rise.
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What To Do If Interest Rates Fall After Your Rate Lock
If you locked in your rate early but interest rates are dropping, you might consider withdrawing the current mortgage application and starting a new one. There are some risks to this approach, however. You could:
- Lose money youâve already paid on an appraisal and other costs, such as a credit check youâll end up paying for them again with a new loan application
- Pay more for processing the new application if the lender or mortgage broker has higher fees
- Wait longer to close on a home, which could complicate your planned purchase of a home if the seller needs the transaction to close on an exact date. This is not as much of a concern when refinancing.
However, if there is a big difference between your possible new rate and the current locked-in rate, it might be worth dropping the loan application and spending a few hundred dollars to obtain a rate that saves you thousands over the life of the loan.
Mortgage Rate Lock Faq
What happens if my mortgage rate lock expires before closing?
If your rate lock expires before closing, youll have to re-lock a rate in order to close the loan. If rates havent moved, your new rate will likely be the same rate you originally qualified for. If rates increased during the lock period, your rate will likely go up. But if rates have fallen, you will not get a lower rate. Youll likely still get the original rate you locked in.
Can you lock in a mortgage rate with more than one lender?
Yes, you can lock in a mortgage rate with more than one lender. Some borrowers decide to lock a rate with Lender 1 and let their rate float with Lender 2. That way, if rates fall, they have a backup. They can lock in a lower rate with Lender 2 and cancel their application with Lender 1 with fewer consequences.
Can you change lenders after locking a rate?
Yes, you can change lenders after locking a rate. But youll have to start the application process over with your new lender. That means getting pre-approved, submitting all your documents, and waiting for underwriting twice. All in all, closing a mortgage or refinance usually takes more than a month. So if youre anywhere near the closing date on your original application, consider your options very carefully before deciding to change lenders.
Can you negotiate mortgage rates?Can I back out of a mortgage rate lock? Is it smart to lock in a mortgage rate?Can my loan amount change after the rate lock?
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Things Will Be Slow To Stabilize
Nicole Rueth, senior vice president at The Rueth Team powered by OneTrust Home Loans, says she expects to see continued volatility as rates slowly drop into the low to mid 5 percent range heading into 2023. In anticipation of the 0.5 percent Fed rate hike expected by Dec. 14, we will see PCE on Dec. 1 and CPI on Dec. 13, she says of the Personal Consumption Expenditures and the Consumer Price Index, which are used to track inflation.
Rueth says that if both of those continue to show softening inflation, the Fed may lower their next bumps to 0.25 percent during their first two sit downs of 2023.
Should You Choose A Longer Rate Lock Period
All things being equal, consumers should choose a longer rate lock period to ensure they can get the agreed upon rate even if there are delays in processing the loan. But theres a catch: Sometimes if you pick a rate lock with a longer duration the interest rate wont be as good as with a shorter duration rate lock period, or the lender may charge a fee for this longer duration. Normally if a loan fails to close within its lock period, the borrower will be charged the worst case scenario price for a re-lock . Ask your lender to spell out the differences in cost and rates for different duration periods.
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What If You Lock In A Mortgage Rate And The Rate Goes Down
Mortgage rates fluctuate daily â sometimes hourly. From the moment you apply for a mortgage to the day you finally close, interest rates can change immensely â and not always downward.
To protect you from rising interest rates, lenders will offer a mortgage rate lock.
Essentially, you’re guaranteed to have the same interest rate from the day you applied or got preapproved for as long as it takes to process your mortgage, or 30 to 60 days. Even if interest rates skyrocket during this period, your locked interest rate will be protected.
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After I Lock My Interest Rate Will My Rate Change
If there are no changes to your loan application and your loan closes on or before the rate lock expiration date, we will close your loan at the locked interest rate.
However, your interest rate may change from the time of your initial rate lock if there are changes to the factors used to determine your interest rate. These kinds of changes may also be called “rate or price adjusters” because they can raise or lower the interest rate on your loan.
Here are some examples of changes that may raise or lower your interest rate:
- The appraised value of the property is different than the value used when you initially locked your loan.
- Your credit profile or qualifying income changes between the time you initially locked your loan and the loan closing.
- Your requested loan amount increases or decreases after you initially locked your loan.
- The type of loan you are applying for changes.
- Your down payment amount changes.
- Some of your income information, such as bonus or overtime income, cannot be verified.
If your interest rate or costs associated with the interest rate change, we will send you an updated Interest Rate Lock Agreement.
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Should I Lock In My Mortgage Rate Today
Mortgage rates repeatedly set record lows in 2020 and 2021, falling into the low 2s for some lucky borrowers.
Rates have rebounded since then, but theyre still low. Todays borrowers can find cheaper home financing than almost all borrowers in U.S. history .
But if youre still not comfortable locking in quite yet, theres always the option of locking with a lender that offers a float-down provision as a safeguard.
Shop around and compare your options today.
What Locking Your Mortgage Rate Means
You can lock in an interest rate when you and your lender feel market conditions are favorable enough to provide the best available rate for your mortgage.
Note that the final interest rate you end up locking may be different from the rate that was used when you received your preapproval letter. However, after you lock, your lender will honor that rate, even if market fluctuations cause rates to increase.
Keep in mind that rate locks dont go on indefinitely. They typically last between 30-60 days, which is long enough to get most loans through underwriting and to the closing table. When you do decide to lock in your rate, confirm that the lock period extends beyond your closing date. If your rate lock expires before this time, it can be extendedjust check with your lender to find out if doing so will result in any additional fees.
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Advantages Of A Mortgage Rate Lock
Rate locks are popular with buyers for a reason. Here are a few advantages of locking your rate into place early as a borrower:
- You are sure of your interest rate and are in a better position to determine how much house you can afford.
- With a locked rate, you can focus on what you need to do to get to closing, rather than worry about what is going on with interest rates or getting stuck with a higher rate if your closing is delayed.
- You can usually extend the low rate for longer if needed.
Whats Happening With Home Sales
The National Association of Realtors recently released data for house sales. In October, existing home sales fell 5.9% from the previous month. Sales have fallen 28.4% year over year, dropping from 6.19 million in October of 2021. Properties have remained on the market for about 21 days in October, up a few days from the 19 days in September. Its also worth mentioning that first-time home buyers made up 28% of sales in October.
The annual share of first-time home buyers hit 26%, the lowest figure since NAR started tracking data. Theres plenty of speculation that many potential home buyers have simply chosen to invest in other assets.
According to other data released from the NAR, pending home sales in October fell 4.6% from the previous month, marking the fifth consecutive month of declines. The pending homes sales data is critical because a sale is listed as pending when the deal has been signed but the transaction hasnt gone through. There have been issues with folks qualifying for mortgages due to the higher rates.
Additionally, homebuilder sentiment in the single-family housing market dropped to its lowest level since June 2012. With builders facing problems with increased labor and material costs that are leading to lower demand, the index from the National Association of Home Builders went to 33 in October. This is the 11th consecutive monthly drop in this index.
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Why Is It Important To Choose The Right Rate Lock Period
You’ll want to make sure your rate lock period is long enough to take you to closing and disbursement of funds. Some loans require longer rate lock periods.
- It is important to choose a rate lock period that makes sense for your loan.
- If your rate lock will expire prior to closing and disbursement of funds, a rate lock extension will be required to close your loan. We will extend your rate lock at no cost to you.
- The length of your rate lock period may impact the cost of your loan, and some may require a fee up front.
How Mortgage Rates Have Changed Over Time
Todays mortgage interest rates are well below the highest annual average rate recorded by Freddie Mac 16.63% in 1981. A year before the COVID-19 pandemic upended economies across the world, the average interest rate for a 30-year fixed-rate mortgage for 2019 was 3.94%. The average rate for 2021 was 2.96%, the lowest annual average in 30 years.
The historic drop in interest rates means homeowners who have mortgages from 2019 and older could potentially realize significant interest savings by refinancing with one of todays lower interest rates. When considering a mortgage refinance or purchase, its important to take into account closing costs such as appraisal, application, origination and attorneys fees. These factors, in addition to the interest rate and loan amount, all contribute to the cost of a mortgage.
Are you looking to buy a home? Credible can help you compare current rates from multiple mortgage lenders at once in just a few minutes. Use Credibles online tools to compare rates and get prequalified today.
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