WHAT IS A RATE LOCK AND HOW DO I GET ONE?

Serving one’s country is a selfless act, performed by men and women who face danger and tough decisions.

Purchasing a home should not be complicated. Understanding interest rates and locking in those rates can save buyers thousands of dollars over the term of the loan.

WHAT IS A RATE LOCK?

When purchasing a home, outside of the purchase price buyers can save on their monthly mortgage payment by locking in low rates.

Interest rates can mean the difference between spending thousands of dollars in payments to the lender.

Veterans work hard for their money and taking advantage of low-interest rates helps them keep more money in their pockets.

The market is ever fluctuating and as it changes the interest rates go up and down. Many potential home buyers find the perfect home…

…have their offer accepted and then start the lengthy process of heading to closing. During this time, rates may change.

Borrowers can protect themselves against fluctuations with a rate lock which will set the interest rate and points offered by the lender.

POINTS AND INTEREST RATES

There are multiple options to consider when locking in rates. Lenders may accept points in lieu of a higher interest rate.

Points are purchased by the home buyer and paid to the lender to decrease the total interest rate.

One point equals 1% of the total loan amount. The buyer pays this fee at closing. Points are prepaid interest; therefore, they are tax deductible.

Interest rates decide how much extra a home buyer pays to the lender over the purchase price.

Generally, homebuyers aim for a lower interest rate. This enables more of the monthly mortgage payment to go toward the outstanding balance.

WHEN CAN BUYERS LOCK THEIR RATE?

Rates can be locked in as early as the preliminary loan approval. It is important to understand that a rate lock has a specific time duration.

Lenders vary on the length they offer. Most offer 30 – 90 day durations.

At the end of the designated length of time, the locked in interest rate or points will expire.

Most homebuyers postpone locking in their rates until they have an accepted contract. Finding a home can take some time.

It is a process which includes bidding, getting an accepted contract, inspection and title work. Other buyers wait and gamble that the rate may go down.

It is important to understand that rates can go up or down. Therefore, locking in the rate early or waiting may have equal effects on the mortgage payment depending on the market.

DOES IT COST TO RATE LOCK?

In short, yes. There is no upfront cost. However, the duration of the rate lock will affect the interest rates which will then effect the overall cost of the loan.

Often, the longer the term of the rate lock the higher the interest rate. Lenders may require points in exchange for a longer rate duration.

In these additional charges, the lender is accounting for possible risk of losing out on higher market interest rates.

TIPS TO MORTGAGE RATE LOCK

Speak with a realtor and a lender to understand typical contracting and underwriting processes including timeframes.

Locking in a mortgage interest rate and points can be helpful; however, there isn’t a textbook time to lock in a rate.

Mortgage Originator Jimmy Vercellino, specializing in VA loans, helps veterans use their VA loan benefit to their greatest advantage.  

For more details call 480-351-5904. Visit the site at http://sandiego.valoansforvets.com/

VA LOANS FOR VETS7600 E. Doubletree Ranch Road, Suite 220Scottsdale, AZ 85258Phone: (480) 351-5904Email: jimmyv@fcbmtg.com