With mortgage rates constantly fluctuating, it can be stressful to start looking for a home. What if you can afford a home with today’s mortgage rate, but by the time you find a home, those rates have increased?
There may be a solution: a mortgage rate lock.
If you’re not sure what a mortgage rate lock is, or how it can help you on your path towards homeownership, a recent article from realtor.com addressed some common questions about mortgage rate locks, including:
- What is a mortgage rate lock? A mortgage rate lock is an agreement between you and your lender where the lender commits to giving you a mortgage at a specific interest rate, as long as you close on your home within a certain period of time.
- What are the benefits of doing a mortgage rate lock? As the name suggests, the benefit of a mortgage rate lock is to secure (or “lock in”) a mortgage rate. Locking in your rate gives you peace of mind that, even if mortgage rates rise between the time you’re approved for your loan and the time you close on your home, you know exactly the rate you’re getting on your loan.
- What happens if mortgage rates drop after you lock in your rate? A mortgage rate lock can protect you from rising interest rates, but what happens if mortgage rates fall? The answer is… it depends. Once you lock in your rate, many lenders will hold you to that rate, even if rates drop in the interim. On the flip side, other lenders may be more flexible and provide you with a lower rate in order to keep your business. If you’re concerned mortgage rates may drop, and you want to make sure that you’re eligible for a lower rate if they do go down, make sure to confirm whether or not your lender offers you that option before committing to the rate lock.