of time. Th is protects the borrower from rising interest rates in the period between sales agreement execution and closing (o ft en a month, but sometimes longer). So, for example, if the buyer locks in a rate of 3.25%, he or she will have to pay only 3.25% interest, even if rates rise while going through the loan application process. A mortgage rate lock is typically good for 30, 45, or 60 days, though that time period can be shorter or longer. Once that time frame expires, the buyer is no longer guaranteed the locked-in rate, unless the lender agrees to extend it. However, this extension could come at a price, so always do your research, and fin d out what your lender requires. Arranging a prompt closing is crucial. Step 3: Protect Yourself with Home Insurance Make sure you’re covered with homeowner’s insurance before the closing process. Unless you’re paying the sale price of the home in cash, which is unlikely, your lender will require the purchase of homeowner’s insurance ahead of time. A ft er the agreement to purchase, but before closing and title transfer, it’s the seller’s duty to ensure appropriate insurance coverage on the house and property. Immediately on closing the sale and when title transfers, the seller no longer has an insurable interest in the property, therefore the seller’s coverage ceases. Th e new owner must have homeowner’s insurance coverage in place. In most cases, you’ll be asked to provide proof that you’ve prepaid one year’s worth of coverage before the lender will set closing. Th e lender holds a lien on the property until the mortgage has been paid o ff . To safeguard their interest, lenders want fin ancial protection in the form of a home insurance policy to pay for the cost of rebuilding your home, should disaster occur. A standard homeowner’s insurance policy generally protects against (among other items): 160
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