Let's Talk About Rate Locks

Let's Talk About Rate Locks

Last week we took a social media poll asking our followers what they believe to be the most intimidating part of house hunting. We were shocked to see that the answer was 100% unanimous -- obtaining financing.

We totally see why this part makes people gun-shy, especially in today's market. Rates have been at record lows and now that they are rising, it makes uncertainty that much more of a road block.

Luckily, mortgage professionals have anticipated this issue and created assistance programs to ease buyers' concerns. One of the most noteworthy programs that we recommend taking advantage of are rate lock programs.

So what is a rate lock? 

Just as it sounds, a rate lock program will allow you to freeze your home's interest rate based on today's rate instead of the date that you actually close on your home. Your rate will be locked in at the time you make your loan application, protecting you from any rises in the market rates while your loan is processing or your home is being built.

How would this impact me?

Rate locks are particularly impactful for homebuyers who choose new construction. While you wait for your home to be built, it's almost certain that rates will change and likely increase before your closing. By locking in your rate, you can have peace of mind as your construction is completed, knowing that your loan approval will remain intact even if market rates increase. Beyond that, securing even a slightly lower rate can save you thousands of dollars over the lifetime of your loan. Check out this example:

Let's say you're buying a home in Woodward Hills

for $322,000 with a 15-year mortgage, at 4.5% fixed

APR and a 20% down payment.

Just a 0.75% rise in interest rates will drive up your

monthly mortgage payments by $100.00.

If you stay in your home for 15 years, that adds

up to more than $18,000 paid towards interest.

When should I lock my rate?

Rates can change daily, and it's very difficult to predict where they will go. However, mortgage experts do anticipate rates will rise throughout this year which is why we recommend meeting with a loan officer as soon as you can. We work closely with Flat Branch Home Loans and trust their team of professionals to give you guidance on when would be the right time for you to lock your rate based on your financial situation.

We also love working with Flat Branch because their rate lock programs offer flexibility for homebuyers that other companies do not. For example, they have rate lock options going all the way up to 290 days and they will allow you to float down to a lower rate if market rates drop before your closing!

How do I get a rate lock?

The first step is to meet with a mortgage professional who can inform you of your options. Here at Schuber Mitchell, we have Flat Branch Home Loans representatives at our new home centers ready to answer all of your financing questions. Click the link below to set an appointment with a New Home Specialist who can get you all set up!

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