July 22, 2017 06:38 AM Eastern
Mortgage Rate Lock Recommendation
July 21, 2017 - Float
Just as at this time yesterday, it is looking as if mortgage rates might edge down today or perhaps hold steady. However, that forecast is based on early market trends and those frequently change speed or direction during the day. So a sharper fall or even a rise remain possible. Our prediction could be undermined in coming hours by economic, political, and geopolitical news that might affect the American and global economies, though little is scheduled for coming hours. Still, if we were currently buying a home, we would float our rate now and revisit that decision on Monday morning. Read on to discover why you might prefer to lock.
Average rates for 30-year fixed-rate mortgages were unchanged yesterday, remaining at a low for July. However, they remain noticeably higher than at some times earlier in the year, including toward the end of June. Indeed, if you glance at the chart above, you will see the previously firm downward trend since March sharply reversed in June. Rates could fall further in a sustained way but there is no guarantee of that. What happens next will depend on whether relevant news becomes more or less positive in coming days. Absent other factors, good news tends to push mortgage rates up, while bad news usually pulls them down.
Many experts would urge you to look now, particularly if you need to lock anyway within the next few weeks. Others might suggest you continue to float, providing you have time to ride out the coming near-inevitable ups and downs. They perceive recent rises as having mainly been the results of technical stimuli (to do with government bond markets in Europe) rather than firm evidence of improving health in the underlying U.S. economy. But neither group of experts has a crystal ball and there remains a real possibility of continuing volatility. So, either way, you are taking a chance. Only you can decide on the level of risk with which you are comfortable.
"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.
You can lock in your loan at any time during the process. Until you lock your interest rate, you are said to be "floating" your mortgage. The only rule is that you have to lock in before you can close on your purchase or refinance.
The decision to lock or float your loan can have a long term impact so it’s important you make the right choice. That’s why we offer a quick rundown of the key factors that drive mortgage rates today and everything you need to know.
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