Quincy Real Estate Mortgage Rate Lock Advice

For the last few months interest rates have taken another big cut as they were creeping up during the summertime. The Quincy Real Estate Market is no exception. Currently interest rates at 5% and below are not outrageous. Mortgage interest rates often change several times throughout the day. This makes getting a rate lock very important and can be the difference between saving tens of thousands of dollars.

A rate lock is a commitment from a lender to loan money at a certain rate. “Points” can also be locked in by lenders for a certain amount of time. Points are money that a home buyer spends to buy down the interest rate percentage. For example, a home buyer may pay $1000 and order to change an interest rate from 5% to 4%. Buyers can lock in interest rates either when they submit their loan application, purchase contract, or sometime before closing.

Lenders are advising that nowadays a 45 day rate lock should be submitted with your loan application. Since there are so many short sales and foreclosures in the marketplace it’s not unusual to see a residential home closing taking 45 days or more. Often times there will be delays because there are issues with the appraisal. If you do lock your rate and interest rates rise during the 45 day period depending on what type of lock you are in it may or may not be honored at the lower rate. If rates fall within the 45 days, you’ll likely be locked into the original rate, however it may be advantageous to switch to another lender if you are not in contract with a certain home yet.

Some lenders offer a float down – “A mortgage rate lock with the option to reduce the locked interest rate if market interest rates fall during the lock period. A rate lock with a float-down option can provide the borrower with security against an increase during the rate lock period, while the float-down option allows the borrower to take advantage of a fall in interest rates during the lock period.” A float down is usually a one time only option.

Savvy home buyers will make sure to get all financial paperwork in order to speed up the loan approval process and cash in on the 45 day rate lock. Often times real estate deals get all out of whack because a lender will be waiting on a homebuyer’s financial paperwork to be submitted. Considering our current financial state and increased regulation and threat of lawsuit it’s all the more important to be well prepared when applying for a loan.

As a homebuyer you may want to protect yourself by requesting a good faith estimate from the lender or a written rate lock commitment. If a lender tries to weasel out of a rate lock and you don’t have a written commitment it may be hard to enforce the rate lock.

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