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.
Once again, it is looking as if mortgage rates might rise today – perhaps appreciably. However, that forecast is based on early market trends and those frequently change speed or direction during the day. So a smaller increase, a holding steady or even a fall all remain possible. Still, if we were currently buying a home, we would lock our rate now. Read on to discover why you might prefer to float.
Our forecast could be undermined in coming hours by any economic, political, and geopolitical news that might affect the American and global economies. There are no scheduled items on today’s calendar. However, take note of the possibility of a partial government shutdown. Absent Congressional action, that is due to begin tonight. And that prospect might spook markets − perhaps resulting in lower mortgage rates if an actual shutdown happens or becomes inevitable. Conversely, any resolution during the day or over the weekend might see mortgage rates rise further.
Average rates for 30-year fixed-rate mortgages rose significantly yesterday. They are now at their highest in more than nine months. Don’t be fooled by Freddie Mac’s announcement yesterday suggesting only a modest rise during the most recent seven days. Freddie will not have counted Wednesday and Thursday’s rises.
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 for investors tends to push mortgage rates up, while bad news usually pulls them down. Unfortunately, those “other factors” are sometimes present. 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.
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