What does
the term "locking the interest
rate" mean and how and when should
you lock your rate?
When a lender
"locks" the interest rate,
you are guaranteed a specific interest
rate for a specific period of time.
That period of time is called the
lock period.
The lock guarantees
your rate as long as your loan closes
and funds prior to the expiration
date of your lock period. If your
closing is delayed beyond your lock
expiration date, you might have to
pay higher market rates.
It is good advice
to lock for a period longer than you
need. In other words, lock for a period
beyond your actual closing date. This
will protect you against any unforeseen
circumstances that could delay your
closing.
Typical lock periods
are 15, 30, 45 and 60 days. In a stable
rate environment, shorter lock periods
generally provide you a better interest
rate.
However, the market
can be volatile and rates move with
market activity, both up and down.
Let's look quickly
at the three possibilities for rates:
•
Rates could go up
• Rates could go down
• Rates could stay the same
If you believe
rates may go up, especially by a significant
amount, lock as soon as possible.
If you believe
rates will go down, you would definitely
benefit by waiting to lock.
If you believe
rates will stay the same, you may
also do better to wait.
Of the three scenarios,
you benefit from a longer lock only
when rates go way up after you lock.
If you have not
locked in when you receive your application,
you may notice that the rate on the
application is somewhat higher than
the market interest rate. You are
not committed to that interest rate.
Your Mortgage Consultant has intentionally
used a higher rate with which to qualify
you in the event that rates do go
up prior to locking in. You are still
approved, and will not have to get
re-approved or do any more paperwork.
Once you have
a property under contract, you can
lock your rate by simply requesting
a lock term. HomeBanc will fax or
e-mail a confirmation to you and request
you sign and return the document within
24 hours. It's that simple.
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