Plan and prepare for the process to take some time, and accordingly, wait to lock in your rate. If you lock in the mortgage rate too early, before you’ve found the right home, and the process takes longer than you planned for, than you might miss out on the opportunity for a better rate that could come along before you complete the purchase — or get stuck paying more in order to extend the mortgage rate lock once it expires, as I explained above. The longer you hold a rate lock, the more expensive it becomes. For example, according to Bankrate.com, “a borrower who chooses a 30-day lock on a loan may pay a 4.875% rate and zero points, while a 60-day lock might cost 1 point (equal to 1% of the loan) or a slightly higher rate with a half-point.” However, this doesn’t paint the whole story. Sometimes waiting is not the name of the game. As some buyers do, you might also consider “jumping” on a low rate as soon as you find one and as soon as possible (after home loan approval, of course). Yes, you risk having to pay more in order to extend the mortgage rate lock in case you don’t find the right home in the amount of time you’d hoped and planned for, but as mortgage rates are expected to rise, locking down a low rate as soon as you’re able to might not be a bad idea. Because, when you do the math, even a small hike in interest rates, such as a quarter of a point, can make a major difference in the long run — even hundreds — or thousands — of dollars in interest every year.
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