Mortgage rates keep fluctuating. They simply move up and down every day and every hour. These changes in the mortgage rates impact greatly on the amount you pay if you wish to refinance or close your mortgage. A mortgage rate lock acts as a great way for protecting you from the costly rate fluctuations and helps in freezing the interest in the place.
Lenders in Texas, in this article, will brief you about how mortgage rate lock works and when you should lock your mortgage rate. Keep reading to find out.
What do you mean by a mortgage rate lock?
After you have been pre-approved for your mortgage from the mortgage lenders, you can start finding the house that you want to buy. Once you find a house that you like, you can make an offer on that house. If your offer gets accepted and you have sealed the deal, you have the chance to lock in your mortgage rate. When you decide to lock in the mortgage rate on your Texas home loans, it simply means that you and your lender agree to a certain rate of interest that is locked in. This figure gets locked in for a defined time period even if the market rate moves higher or lower.
This lock includes the interest rates, the total days of the lock, and the points that will be charged. If you are building your house, then it will not be completed for months. In that case, mortgage lenders in Texas offer new rate locks for 180 days, 270 days, or even 360 days or more.
When can I lock in a mortgage interest rate?
You can choose to lock in the mortgage rate the moment you select the type of mortgage, up to 5 days before you close. When you start looking into it early, you can get what you want from the beginning in terms of your budget. Any increase in the interest rates will not affect you as long as you make sure to lock the rate before it expires. The ideal time to lock in the best mortgage rates is when the interest rates are lowest, but this can be difficult to predict..
It is important to note that interest rates can decrease during the locking period as well. If that happens, you will most likely be paying the rate that you locked in initially. If the lock period lapses before the closing, you can negotiate on the same with the local mortgage lenders in Texas. This too depends on the lender as well as the circumstances.
Mortgage lock rate techniques:
The interest rate keeps on fluctuating every day. As you begin your hunt for a house and compare the Texas home loans, you can see how the interest rates are doing daily. It always follows a pattern – dips or hikes that last for some time. Based on that information and your budget you can decide when you want to lock in your mortgage rate.
Another trick is to lock in the mortgage rate early on. No matter what the interest rate will be, you will know what is in store for you. If the interest rates drop dramatically in the future, you always have the option of refinancing your house for taking advantage of the low-interest rates. Whether you are a first-time home buyer or refinancing, you can negotiate the rates with your mortgage lender.
Should I lock my mortgage rate?
A lot of borrowers always wonder whether or not they should lock their mortgage or wait till the closing process. If you are happy with your rates once you have got the approval, then locking the interest rate can be a wise option. The best time to lock in the rate is when you are comfortable with the amount of the monthly mortgage payments.
If you plan on floating with the mortgage rates, then it is important to consider the impact of the higher mortgage rate on your finances. Even the slightest increase in the rates will add up 100s of dollars to the monthly payments. Hence, locking your mortgage rate can be an added layer of security and you will know how much you will be paying every month.
While locking in the mortgage rate can save you money over time, you must also check with your mortgage lender beforehand so that there are no charges associated with this option. Some financial institutions and banks have certain charges to lock the fees based on the type of mortgage you are using. You can either pay the fees upfront or make it a part of your closing costs.
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The Bottom Line
Every homebuyer has their own unique circumstances. Hence there is no universal time for locking in the mortgage rate. It entirely depends on the situation of the market and personal financial situation. While some people prefer to lock in the rates from the beginning, others prefer to do so when the rates are lower. The wise rule of thumb here is to lock in the rate when the scenario works in your favor and meets your budget needs. You will have to assess the rate of risk you are comfortable taking in and move on from there.
While it is a lot to think about, if you are planning to buy a house or have one built, Lenders in Texas are here for you. Give them a call and they will guide you through the loan process and solve all your queries, including the one related to mortgage locks and the type of mortgage plan that works the best for you.