When is the right time to lock in a mortgage rate?

This is an open-ended question. I’ve had people ask me when the best time is to lock in their rate even the best time of day or the day of the week. But the best time to lock in a mortgage is usually when the unexpected happens. Any unforeseen shifts in the market are some of the best times to lock in a mortgage. You want to lock it in when it is the lowest that you can go for that time period. It’s kind of like trying to hit a moving target. The time to lock in a loan also depends on the buyer’s circumstances. This is why it is so crucial to work closely with a mortgage broker during this process.

The earliest time in which you could lock in a loan is after the initial loan approval. However, many borrowers choose to wait until they find a home before they lock that rate in. Many homebuyers wait until they have an actual contract before locking in their loan. This is because locked-in rates have expiration dates. You may not be able to find a home during that locked-in time at which case it could expire and you have to start all over. You can extend in a locked rate but it can be more costly. A borrower that chooses a 30-day lock on alone usually cost less than a 60-day lock. As soon as you lock in that rate it is like a ticking clock. You have to find a home and go under contract before the rate expires. However, you could get a lower rate when the time comes but if rates increase during that locked-in period, you are still guaranteed the previous locked-in rate.

Most rate locks are between 10 and 60 days. This guarantees the interest rate for that particular time span. If you choose to extend the lock it will cost you in points. One point is equivalent to 1% of the total loan amount. The more points you pay the lower your rate can be and most lenders can roll the cost into a new loan. If rates arise during your locked-in period you are still safeguarded and guaranteed the previous rate.

If rates drop there are several options for borrowers. You can keep your locked rate as it may not be worth trying to renegotiate over a small reduction but if the rate drops dramatically you could take advantage of the new, lower rate. Lenders use what’s called a float down strategy which allows you to reset your lock to a lower rate. This can be costly though. The best option is to talk to your lender about your current situation when you plan on buying a home, and the best time to lock in your rate.

I would love to talk to you about today’s rates and get you started on the preapproval process. Give me a call today.