How do mortgage rate locks work

how do mortgage rate locks work

A new Loan Love guide helps borrowers decide when to lock in their rates.

San Diego, CA (PRWEB) July 05, 2013

How do mortgage rate locks work. LoanLove.com, a website with the mission of helping consumers and borrowers to obtain the latest information on mortgage lending trends, the real estate market and U.S. financial landscape in order to help them obtain a home loan that they will love, helps their readers to understand the ins and outs of mortgage rate locks in a recently posted guide. The team at LoanLove.com is devoted to help empower both first time and experienced homeowners with valuable resources, first-class knowledge and connections to top-rated industry professionals. To fulfill this goal LoanLove.com is continually updating their website with new articles and guides. The new guide continues to help new and experience homeowners with the best rate lock advice.

The Loan Love article says: “If you’ve been mortgage shopping, you’ve probably seen a lot of interest rates – some lower than others. You’ve probably also been following news reports about the recent increase in rates, and even though rates are still near record lows, it’s pretty obvious that now is the time to take out a new mortgage or refinance an existing one. Of course, once you do decide to apply for a mortgage, it takes time – usually a few weeks – before the mortgage will be finalized. At the end of that time, you want to be sure you end up getting the same low rate that was in effect when you submitted your application. The way to do that is by locking in your rate. and maybe even your points.”

So what is a rate lock. A rate lock is when a borrower

locks in their rate or points to ensure that the rate and points that they were quoted when they originally applied for the mortgage will still be in effect when they go to settlement. However, it is important to note that not all lenders allow potential borrowers to lock in their rates or points. Those that do however will either allow a rate lock when the loan is filed or during the application process. Typically, most borrowers prefer to lock in their rate and points when they submit their applications - especially in a market when interest rates are more likely to be rising (as they are now). Locking in the rate ensures that the borrower will be able to avail of the original low rate even if interest rates increase during the loan processing time. But it also means that they will not be able to benefit if rates fall during this period.

Borrowers also have the option to “float” their rate. The Loan Love article gives this mortgage rate lock advice: “In a market where you aren’t sure whether rates will fall or not, you might choose to float your rate. That means that although you lock in the rate when you make an application, the lender will adjust the rate to any lower interest rate that occurs while your application is being processed. Of course, if rates rise, in most cases the rate will “float” upward with them. Since points also typically fall with interest rates, some lenders also allow points to rise and fall during the application process.

For more tips on when to float and when to lock in a mortgage rate. please visit LoanLove.com for the full article.

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Category: Credit

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