Don’t make the mistake of assuming that a mortgage rate lock will provide unlimited protection. Yes, a lock will certainly protect you against rising interest rates when the market shifts, but a lock will also prevent you from taking advantage of an even lower interest rate if rates fall when the market shifts in the other direction. Before you enter into a rate lock agreement, ask your lender if they will offer you a “one-time election,” or a mortgage rate lock “float down,” which will allow you to exchange your current rate for a lower rate if prevailing rates have generally fallen.
BE PREPARED FINANCIALLY
Before locking in a mortgage rate, make sure you are financially prepared for this step. If you find and try to lock down a great rate, but in the end, you aren’t financially ready to apply for and qualify for a mortgage, then you’ve not only lost on a great rate, you’ve wasted time and energy. Check (and possibly fix) your credit score, save for your down payment, build your regular savings account, determine how much you’ll need for monthly mortgage payments — as well as other standard costs, such as closing costs, homeowner’s insurance, property taxes, and ongoing maintenance — and look for homes within your budget. Bankrate.com adds that “if you lock in a rate too soon and end up going with a different type of loan, your rate lock might be void.” You could also lose out on a mortgage rate lock if your situation happens to change, including a significant credit score shift or change in debt-to-income ratio, before closing and ultimate settlement.
THE BOTTOM LINE
In the end, when you’re shopping for a home loan, looking for a great deal, and then locking in that deal, is a good idea. The trick
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