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.
It is looking as if mortgage rates might hold steady today, or perhaps just inch 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 rise or fall remains possible. Still, if we were currently buying a home, we would lock our rate today. To discover why you might prefer to float, read on.
Our forecast could be undermined in coming hours by any economic, political, and geopolitical news that might affect the American and global economies. The biggest news this week is likely to be tomorrow’s announcement and press conference) by the Federal Open Market Committee. That is the Federal Reserve body that determines monetary policy, including interest rates. Few expect a hike this month, but the committee could still cause waves in markets. Besides that, domestic data for August housing starts were out this morning, and these were better than expected.
Average rates for 30-year fixed-rate mortgages edged up yesterday, returning to last week’s overall trend. That is not a surprise: Most domestic economic data have been slightly better recently, and many expected upward movement once more immediate threats from global tensions, natural disasters, and other external factors receded. Of course, for all anyone knows, there could be more such threats around the corner, in which case rates could fall again.
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.
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