A California Mortgage Consultant Like Bill Rayman Can Help You Make the Best Possible Decision Regarding the 9th Step in How to Get a Great Mortgage - Rate LockingSome loans close in less than 30 days. Others can drag on for 90 days – or more. During the period between the formal application for the loan and the final closing, rates will invariably change. Whether they will go up or down is a question each borrower must decide for himself. This decision is probably the toughest one for any borrower.
The crux of the issue is this. Because a bank takes a risk that rates will rise after you lock in a low rate, they will charge more – in fee or rate - for locks of longer duration than short ones. You can choose to lock at any point from the application to the close. If you believe rates will remain low during the loan process, you’re best off waiting to lock till the end. If you believe they’ll rise, you benefit by locking early.
Unless and until you lock a rate, you will pay the prevailing market rate at the time of your close. Some lenders allow a short term lock for free, so be sure to ask for it. Few lenders will allow locks longer than 60 days, but with interest rates this low, it’s worth considering paying a small fee to secure a low rate early in the process.
Remember: locking is a two-way street. It protects you from rates rising, and it protects lenders against rates falling. There are practices lenders enact that prevent people from cancelling locks or renegotiating for lower rates.
For a much more in depth look at locking, check out my video on mortgage rate locking
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