about the lender’s mortgage rate lock rules. If you’re unsure, ask. For example, ask if your locked rate can or will change in certain situations. Second, keep in mind that locking in a low interest rate can come with a cost. Some lenders charge a mortgage rate lock deposit upfront, and others offer a rate lock in exchange for a slightly higher interest rate than the current prevailing rate, or require the borrower to pay a certain number of points, either fixed or floating. “Fixed points refer to a set number of points; with floating points, the interest rate is locked in, but the number of points that must be paid to guarantee the rate can change over time,” explains Lisa Smith. Next, you must ensure your mortgage rate lock will last long enough to cover the entire home-buying process from start to finish. Some closing processes can last a month or longer. If you suspect this will be your situation, talk to your lender about locking down a rate for the full length of that drawn-out process without paying any penalty fees. Keep in mind that if the home doesn’t close before the end of the agreed-upon mortgage rate lock period, then the guaranteed rate that you “locked in” will expire; further, any deposit you paid could be forfeited to the lender. Finally, don’t assume that a mortgage rate lock somehow provides unlimited protection. While a mortgage rate lock protects you against increasing interest rates during inevitable shifts in the housing market, it will also prevent you from grabbing an ever- lower interest rate that comes along. Before you finalize your rate agreement, consider asking your lender if they would offer a mortgage rate lock “float down,” allowing you to exchange your current rate for a lower one.
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