Here’s what you need to know about locking in your interest rate.
“What happens if I’m in the process of buying a home and my interest rate changes?” I receive this question all the time, and I understand why. Rates are all over the place right now, which is why I believe it is crucial to lock in your rate.
First, you have to work with a lender you know. They’ll guide you through the process and help you lock your rate.
Now let’s say you’re under contract. Once you have an accepted offer, lock in your rate as soon as possible. Some lenders like to risk it and see what the market does, but to me, it is not worth it. Sure, they may fall 0.1% randomly, but all signs point towards the Federal Reserve continuing to raise rates. In my opinion, this is the right time to lock in your rate.
So what happens if you open an escrow account, lock the rate, and it goes down? It’s unusual to see a rate go down from 5.5% to 3%; big jumps are uncommon. However, even if rates fall a quarter of a percent, it could have a major impact on your monthly payment. So what should you do?
First, you can unlock your mortgage after you lock it. However, this option is risky because it can also increase. If you’re concerned about rates falling, ask your lender about a float down option. You will pay an additional closing cost, which should be anywhere from 0.5% to 1%. In return, your rate is only locked from increasing, but it can still fall.
If you have any more questions, feel free to reach out to me at (619) 333-2556. I look forward to hearing from you soon!
