Rates. They are a popular topic. We hear rate questions all the time. What is the current rate? Will rates go up? How do I get the best rate? Let’s take a moment to address a component of rates that is less frequently mentioned: rate locks. 

What Is A Rate Lock? 

A rate lock is a means to set your mortgage interest rate so that it does not change before closing as long as you close within the defined timeframe and the aspects of your loan application do not change. 

What is a rate lock

Why Should I Lock My Rate? 

If the current available interest rate fits within your budget, it is recommended that you lock that rate. There is no crystal ball guaranteeing that rates will go up, down, or hold steady. By locking your rate, you can relax and worry less about what’s happening with rates and focus on the big stuff like the purchasing process like appraisals, inspections, and getting ready for your big move. 

When Can I Lock? 

Your rate is tied to a variety of factors including the value of the property. So, you need to have a specific property and a purchase agreement to lock your rate.  Once you’re preapproved and have found your home and signed a purchase agreement, it is simply a matter of the financials suiting your needs. If the rate offered fits within a comfortable monthly payment for you, it is probably time to lock it.  

How Long Can I Lock? 

Rate locks are offered in a variety of time spans and the price for the lock increases as the length increases. For example, a 60 day rate lock will cost more than a 30 day lock. In a typical purchase scenario at Philadelphia Mortgage Brokers, homes tend to go from purchase agreement to closing in 30-45 days. There are options to extend a rate lock but they come with additional costs. It is best to give yourself enough time to comfortably make it to the closing table when you initially lock your rate. 

I Have My Loan Estimate. What Questions Should I Ask About My Rate? 

Your loan estimate will state whether or not your loan is locked but it will not note the length of the lock or the cost for an extension, the fee associated with your lock, or the fees for an alternative lock timeframe. It is good to ask your loan officer the following questions to make sure you know what the terms of the rate are: 

1. What is the time frame for the lock on this Loan Estimate? 
2. Are shorter or longer lock times available? If so, what is the cost? 
3. What happens if my closing is delayed, and my lock expires? 
4. Are there any conditions under which my rate could still change even though I locked it? 
5. If interest rates go down after I lock, what happens? 

Have questions about rates? We’re here to help answer them! Reach out to us today to see how we can help you reach your homeownership goals. Call us at (484)416-4280.