Mortgage Rate Lock
2022 has been a challenging year for buyers. Home values have been rising, and now mortgage interest rates have gone up, too.
Locking your interest rate can help keep your home loan costs predictable.
There’s a lot to consider when you buy a home, such as where you want to live, how much you can afford, and the type of home you want. The kind of mortgage you need and what it will cost are just as important. As you think about your financing, remember your loan amount, credit score, closing costs, down payment, type of home loan, and interest rate all play a part in the cost of your mortgage.
Your monthly mortgage payment is made up of principal, interest, and (usually) property tax and homeowners insurance. The principal is the money you borrow. The interest is the fee charged to borrow that money. The interest rate is a percentage of the principal and has a major impact on the amount you will pay over the life of your loan.
Interest rate lock basics
Locking your interest rate is an important step in your home loan process. When you tell your loan originator you want to lock, your rate is set for your loan as long as you close on time. It won’t change during your loan term if you choose a fixed-rate loan.
Your rate lock period will be for a specific length of time, usually from 30 to 90 days, to allow time for your loan to be approved and, if you’re buying a home, for your purchase contract to be finally approved by both you and the seller. There are extended rate lock options for construction loans.
You can lock your rate as soon as you complete your loan application and select a mortgage. Or you can wait until a few days before closing. The choice is yours, but there are pros and cons.
Locking early means you won’t have to worry about rising mortgage rates. You’ll have peace of mind knowing you’ve made your decision. If rates drop before you close, you’ll be locked into a higher rate, unless you’ve taken a float down (explained below). However, you can always refinance your loan in the future if rates fall enough to make it worthwhile.
Locking later means you’ll see how rates are trending, and possibly lock at a lower rate. You need to be comfortable taking the risk that rates might rise, but waiting could pay off.
No matter when you want to lock, discuss your preferences with your loan officer.
Your loan officer locks your rate when you tell them to. Rates change constantly, even in the course of a day, so it’s important to have a knowledgeable advisor keeping an eye on them. Your loan officer will watch the rate trends for the kind of mortgage selected, and let you know if it looks like a good time to lock.
You could decide to lock because it appears that rates are rising, or staying steady, or have dropped and aren’t expected to fall further. There may be longer-range signals, like economic reports, international events, or actions by the Federal Reserve. Influences on mortgage interest rates are many and complex, so having a trusted expert will help you make the decision that’s right for you.
If rates fall after you’ve locked, and you’re still within the lock period, you’ll probably have to pay the rate you locked. If your rate lock expires, you’ll need to discuss the options for a new lock with your loan officer. Talking to your loan officer is the best course of action whenever you have questions about your loan.
As long as the information on your loan application stays the same once you’ve locked in your rate, the lock will stand. However, if you change loan programs (from conventional to FHA, for example), or your income or employer changes, or your credit score drops, your rate lock may not be valid. For that reason alone, you’ll want to keep everything the same until after your loan closes. More importantly, your loan could be canceled by your mortgage lender if you make changes that affect your creditworthiness.
Rate lock programs
In addition to a standard rate lock as part of your loan process, CrossCountry Mortgage has some special programs that may help you. Ask your loan officer for more information.
CCM Lock Before You Look
What if you could lock your loan before you found the house you want to buy? You can!
CCM’s Lock Before You Look program allows you to lock your rate up front by following these simple steps:
- Apply for your loan, get fully credit-approved
- Lock your rate for up to 90 days
- Shop for your home
- Once your offer is accepted, you’ll be ready for a fast closing
Extended rate lock for new construction
When you decide to build a home, you want some certainty in the process. Building takes a long time, and rising interest rates could make your dream home unaffordable. Use CCM’s extended rate lock program to lock your rate for up to 12 months.
CrossCountry Mortgage, LLC cannot guarantee that an applicant will be approved or that a closing can occur within a specific timeframe. All closing timeframes may vary based on all involved parties' level of participation at any stage of the loan process.