Your rate can only be locked once you have a property. If your property contract falls through you must start over with a new rate. Rates are a time value of money proposition which means the longer the rate lock the more expensive it becomes. Rates vary by program and by a variety of loan characteristics. Those characteristics include: credit score, loan purpose (purchase, refinance, cash out), property usage (owner occupied, second home, investment home), down payment amount, property type (condo, multi-family). Rates fluctuate daily and are influenced by world economic events.
Advice on Locking:
Because rates fluctuate daily, it is difficult to predict the best time to lock a rate. Just like picking a stock at the cheapest point is extremely difficult, locking a rate at the lowest point is also an incredible task. Some lenders attempt to time the market, but there is no fool proof formula to predict market fluctuation. From day to day there are only three things that can happen to a rate: it can go up, go down, or stay the same. I often compare mortgage rate movement to gas price changes. They can go up in a hurry, but often times are much slower to come back down. My best advice when buying a home, is if you're comfortable with the rate as we quote it, lock in the rate and take that uncertainty out of the equation.
The Rate Lock Process:
Once we lock in a rate it is committed for a certain period of time (usually 30, 45, or 60 days). Any changes to your loan criteria will all be based on the day you locked. If rates go up, your rate won’t change. Subsequently, if rates go down your rate will remain unaffected. If a major event causes the market to go down drastically it may be possible to renegotiate your rate lock but this is an uncommon and rare occurrence. This also requires a significant change within the rate (i.e. 4.5% to 4.0%). It is important to know that if dates on your loan change, that we don't allow the rate lock to expire as it can be very expensive re-locking a loan. If a rate lock needs to be extended, due to a change on the buyer's end, the cost must be passed along to the borrower.
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