Many mortgage seekers follow current interest rates religiously, hoping to get the absolute lowest one possible. If you fall into this category, you’re likely aware that this year’s rates have dropped considerably, making now a great time to be a borrower. You probably also know that there are a number of things that affect mortgage rates, such as these.
However, you’re likely also aware that in recent weeks, they’ve slowly but steadily been rising. So if you’ve been wondering if you should take the plunge now, and how to go about locking in a good rate, here’s what you need to know.
Low, But Rising Rates
The beginning of 2015 saw conventional mortgage rates hitting near all-time lows, making it one of the best times to buy a home or refinance. However, come mid-May, the Mortgage Bankers Association reported average lender quotes of 4.0%, up from 3.625% a few weeks earlier.
While many borrowers, much like gamblers at a blackjack table, decide to wait it out, hoping for better numbers, this is a risky decision. Rates could still climb, and you could miss out on today’s opportunities. Therefore, if you’re in a position to lock in a rate, now is the time to do so, before those numbers climb higher.
Locking It In
A locked in rate is an agreement between you and your lender, and they typically last for 30, 45, or 60 days, and sometimes up to 90 days. It’s a commitment that begins once you’re pre-approved, and it protects you against rising mortgage rates—you have a fixed interest rate for the agreed upon amount of time. So if you lock in a rate of 4%, and the next day it rises, your 4% is a guarantee.
Timing is Everything
The number one thing to keep in mind is that the loan process takes time. So you want to have enough time for it to process, while keeping in mind that delays can and do occur. But remember, you’ve agreed to a set term (again, 30-90 days), so you don’t have all the time in the world.
First things first, lock in a rate once you’ve already found a house and made a purchase agreement. Then talk to your mortgage broker about your situation, and ask him or her to help determine how long your application will take, which will help you decide on how long of a lock-in period you need. Then lock it in, and get going!
The Long and Short of It
Of course one would assume that a longer period is better, giving you more time for the application process. But keep in mind that longer terms might come with higher rates or fees. In order to decide whether to go with the shorter (and possibly cheaper) or longer one, speak to a qualified, experienced mortgage broker, who can help you make the right decision.
If you’re ready to pull the trigger, now’s the time to do so, before you find yourself regretting that gamble several months down the road.