Interest rates can change daily. Further still, in more volatile times, rates can change during the course of a business day. That means a rate you were quoted this morning may not still be there in the afternoon. Some may also think that the rate quoted over the phone, online, or in person is theirs for the taking. If 6.00% was quoted this morning, that doesn’t mean you can grab that rate pretty much anytime you want to. Instead, you have to lock in that rate with your loan officer. Loan officers won’t lock you in automatically or on their own; you have to make a specific request. When should you make that request?
Personally, I’m a bit conservative on this issue. I say that if you’re comfortable with the rate you’re being quoted and you can qualify, go ahead and lock in. I would lock in as early as possible. Your loan officer will tell you when and how you can lock your rate, but generally speaking, your loan file needs to be complete. Your credit report has been reviewed, your income and asset information has been sent in and looked at, and so on. Why can’t you lock in just over the phone when all you’ve done is send in a loan application?
Lenders take locks just as seriously as you do. When you lock in a rate, the lender, in effect, sets your rate aside and pulls your mortgage money from its line of credit. If the loan doesn’t close for whatever reason, the lender then takes those set-aside funds and returns them to its credit line. When lenders do this too many times, their investors will begin to charge them more money for their credit line withdrawals. That makes things more expensive all the way around.
One thing about locks, the longer the lock period, the more expensive it will be. If you want to lock your rate for 30 days, the price will be slightly higher compared to a 10 or 15-day lock. Higher still for longer-term locks.
By ‘floating’ your rate, you’re unprotected. It takes quite a bit for rates to move down, but rates are jittery. It might take a couple of weeks or more for a rate to move down by say 0.25% but they can skyrocket in the blink of an eye.
What happens if you lock and then rates move down further still? Most loan programs allow a re-lock to the lower rate under certain conditions, but not without a fee in most cases. You might be allowed a one-time float down, but you won’t get the absolute lowest rate available. Close, maybe, but not the lowest.
