At this time borrowers have a chance to lock in mortgage rates at historically low rates. Lower inventory to purchase from and a competitive seller’s market can make finding the right home a bigger challenge. This has some buyers wondering when they should lock in their mortgage rate to get the best one and be able to put an offer in on a home to win out against the competition.
When rates dip low it instinctually makes many of us want to jump on securing a loan before that rate jumps back up. Rates can fluctuate from hour to hour. If you are hoping to apply for a new mortgage and purchase a home you can rest a little with the knowledge that many mortgage professionals predict the rates to stay pretty low for about the next 18 months.
If you are concerned about being able to have the advantage of a low rate there are some lenders that offer rate locks for as long as 120 days. Do keep in mind though that these rate locks may cost more money elsewhere. The best strategy is to get pre-approved and know your finances backward and forwards so you have a very solid idea of what your home buying budget truly is. The best focus in your home buying venture is shopping for homes in the low to medium range of your budget and making sure you find the right home for you. You do not want to rush to purchase a home you sort of like just to take advantage of a one-percent lower interest rate.
What Exactly is a Mortgage Rate Lock?
When you apply for a loan and the lender responds to your application with what they can offer you in a mortgage. They will give you a total approved amount and terms of lending you that amount. This will include the interest rate they will offer on your specific loan. If you agree to accept the terms of the loan the rate will lock in at that exact percentage and will stay at that number no matter what the average rate fluctuates to in the rest of the mortgage market. You are guaranteed the rate that was offered, it is set in stone for the amount of time on the loan paperwork. Usually, this is a period of 30 to 60 days, just long enough to move on getting the loan finalized, approved, and closed.
During this time some buyers are very concerned about getting the lowest rate possible and opt to purchase those longer rate locks talked about above.
Many experts will advise: Don’t pay extra money for an extended rate lock right now. It is expected that rates will stay low for several months even if they bump up a little it won’t be by much. Relax and find a home that truly works for you. You don’t want to be stuck making a huge purchase on something you will regret. If you are concerned the mortgage company will not meet the timeline of closing your loan before the lock period is over talk with them about their capability and guarantee of closing the loan within that lock period.
For more advice or information on mortgages in California during COVID please contact me anytime. I am here to help you find the best opportunity and loan product for your specific mortgage needs.