Wondering, “when can you lock a mortgage rate?” Mortgage rate locks are an important part of the home-buying process because they can help you avoid rising interest and potentially save thousands of dollars.
Rate locks are especially helpful amid rising interest rates, such as what the market is currently experiencing. In late 2022, interest rates sat at a little under 6.5% and were expected to continue rising into 2023.
For this reason, many home buyers are wondering about mortgage rate locks and how soon they can secure their interest rate in the buying process.
In this post, our award-winning team at Your Home Sold Guaranteed Realty — The Nathan Clark Team will break down everything you need to know about mortgage rate locks. We’ll discuss the best time to lock your rate and whether you can lock rates with multiple lenders.
What Are Mortgage Rate Locks?
A mortgage rate lock is a commitment by your mortgage lender to honor a certain interest rate on your home loan. Typically, mortgage rates change often as a consequence of natural market fluctuations. In fact, they can sometimes change multiple times per day.
By locking your rate, you’re protecting yourself if rates happen to rise between the time you apply for the loan, and the date the deal on your new home actually closes.
Your rate will be locked for a certain amount of time, typically for periods of 30, 45, or 60 days. Once your rate is locked, you’ll need to make sure you close on your new home within this period. Otherwise, you’ll need to pay a fee to extend the lock or might face a higher interest rate.
Rate locks aren’t free, but most lenders include the price with the overall rate they quote you. It’s also possible for your interest rate to change even if it’s locked.
One reason this might happen is if there’s an issue with your financial situation. For example, if your credit score suddenly drops. Your rate can also change if your home is appraised for more or less than was originally expected.
While mortgage rate locks are a good way to protect against rising rates, many home buyers wonder what happens to their locked rate if interest rates fall.
The good news is that most lenders offer a float-down option in their rate lock agreements. With a float down, you’ll be able to take advantage of lower rates. However, float-down options usually come at an extra cost– as much as 0.5% to 1% of the loan amount.
When Can You Lock a Mortgage Rate?
If you’re wondering, “when can you lock a mortgage rate,” the short answer is as soon as possible– especially if rates are rising.
However, it’s best to avoid locking your mortgage rate until you’ve spoken with at least three different lenders, compared their quoted rates, and chosen the best deal for you. You should also ask each lender how soon they let you lock your rate.
Once you know which lender you want to use, you should apply for pre-approval. At that point, some lenders will let you lock your rate as soon as they’ve processed your application and reviewed your credit report. Other lenders may prefer to see that you’ve signed a purchase contract for your new home before locking your rate.
Either way, you’ll need to make sure you choose a rate lock period that is long enough for the deal on your new home to officially close. If the deal doesn’t close in time, you’ll need to pay an extra fee to extend your rate lock.
While it’s technically possible to lock rates with multiple lenders, it generally isn’t a good idea. This is because you’ll have to go through multiple loan applications, multiple credit checks, and pay multiple application fees.
For this reason, locking your rate with more than one lender likely won’t save you money if you’re looking to take advantage of the lowest rate.
Instead, it’s better to inquire about your lender’s float-down provision or consider a shorter rate lock period if you know the deal on your home will close soon, since shorter rate lock periods are often cheaper than longer ones.
Buy a Home With The Nathan Clark Team
Locking your mortgage rate is an important part of the home loan process. But getting a good loan deal all starts with finding the right lender. If you need help finding the best lender in your area, be sure to ask your realtor for suggestions.
Experienced realtors typically have a network of lenders, appraisers, and other partners they’ve developed from their years in the business. In addition, they may have special deals or discounts with these partners.
The Nathan Clark Team should be your first choice if you need an experienced realtor to help you buy a home and recommend lenders in New England. Our team has been in the business for 21 years. During that time, we’ve developed an extensive network of lenders and other service providers that we recommend to all our clients.
To learn more about working with our real estate team to buy a home in New England, give us a call at 401-288-3557 or fill out the form below for more information.