When the offer on your home is accepted, you’ll start the process of securing the mortgage for your home. Lenders will give you the option to lock or float your mortgage rate prior to closing (which typically happens 30 days after the offer is accepted).
“Locking” your mortgage means that you and your lender have agreed on an interest rate and price for your home loan. Once your loan is locked, that’s the rate and price you get, regardless of what happens in the financial markets. If rates go up, you’re protected; but if rates go down, you won’t benefit either — you close your loan at the rate you’ve locked and you can’t change it. Locks have expiration dates ranging from 30 to 60 days or more, and the longer your lock period, the more it costs. If you don’t close your loan on time, you could end up paying a higher interest rate.
Every day, LendingTree posts our recommendation (below) on whether you should lock or float your rate, so make sure to check back here prior to making your decision.
We are forecasting that mortgage rates might hold steady today, or perhaps just edge either side of the neutral line. However, that prediction is based on early market trends and those frequently change speed or direction during the day. So a sharper fall or rise remains possible. Still, if we were currently buying a home, we would float our rate today and revisit that decision on Monday morning. Read on to discover why you might prefer to lock.
Our forecast could be undermined in coming hours by any economic, political, and geopolitical news that might affect the American and global economies. Today’s calendar has two predictable items that might move markets. Housing starts in October were stronger than expected. And San Francisco Federal Reserve Bank President John Williams has a speaking engagement at 12:45 pm (ET). Potentially more impactful on markets than either of those would be any unexpected developments over the tax proposals currently being discussed on Capitol Hill. A House bill was passed easily. But the Senate version may face stiffer opposition.
Average rates for 30-year fixed-rate mortgages inched up yesterday by the smallest measurable amount. There have been two sustained periods of upward movements and two of downward ones over the last four weeks, making a firm, long- or medium-term trend hard to identify. So there is still a risk in both floating and locking.
What actually happens next will depend on whether relevant news becomes more or less positive in coming hours and days. Absent other factors, good news tends to push mortgage rates up, while bad news usually pulls them down. Nobody can be certain of the future, so you are taking a chance whether you float or lock. Only you can decide on the level of risk with which you are comfortable.
LendingTree makes getting a mortgage easy! Below are the steps to take to make your mortgage process as seamless as possible: