Tuesday, March 28, 2017

What is a Rate Lock?

You've decided on purchasing a home at the Lake of the Ozarks. You know that mortgage rates are changing daily, so how do you make sure the rate originally available to you doesn't go up? Today's blog discusses rate locks and some common questions in regard to locking in a mortgage rate.

Rate Lock 

A rate lock is a guarantee from your Lake of the Ozarks mortgage lender that they will give you, the borrower, a certain interest rate, at a certain price, for a specific time period. It protects the borrower from rate fluctuations for the duration of the lock period. If market rates rise after the rate is locked, the borrower will still get the lower rate. The downside, however, is that if rates drop after the rate is locked, the borrower might not be able to take advantage of that opportunity.

How a Rate Lock Works

Once your loan application has been approved, your mortgage lender may offer you a rate lock. Sometimes there is a fee for this, and the fee varies widely according to the amount and term of the loan, as well as the rate lock period. Rate locks are typically available for 30,45 or 60 days, and sometimes longer. Typically a rate must be locked at least a few days, but usually a week, before closing. This allows the lender time to prepare the closing package. If the rate lock expires before closing, you may be able to get an extension. If an extension is not granted, you'll end up paying the market rate, which could be higher.

Reasons Your Interest Rate Could Still Change

Even if your rate is locked, it could still change if there are any changes made to your application. Here are some common reasons a borrower with a rate lock could still see a change in interest rate:
  • A change in the type of loan 
  • A change in the loan amount
  • A change in the downpayment amount 
  • A change in the home appraisal
  • A change in your credit score 
  • A change in your verified income  

Questions to Ask Your Lender

Rate lock policies vary from lender to lender. Avoid any surprises with your interest rate by asking your mortgage lender at the Lake of the Ozarks the following questions:
  • What does it mean if I lock my rate today? 
  • What rate lock time frames are available to me?
  • What are the fees associated with my rate lock? 
  • What happens if my closing is delayed and the rate lock expires?  

To learn more about what mortgage rates are available to you and how to lock them in for your Lake of the Ozarks home purchase, call Lakelender Michael Lasson at 573-746-7211. I'm here to work with you every step of the way. I'll discuss your Lake of the Ozarks home financing needs, offer competitive interest rates and back it up with the first-class service you deserve!

For Lake area news, resources and tips on financial services, please 

Michael Lasson
Senior Loan Officer
NMLS #: 493712

4655 B Osage Beach Parkway
Osage Beach, MO 65065

Direct:  (573) 746-7211

Email:  mlasson@fsbfinancial.com

**The postings on this site are my own and do not necessarily represent First State Bank of St Charles’s positions, strategies, or opinions.

No comments:

Post a Comment