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Locking in a mortgage rate requires shopping around with lenders. When shopping for mortgage, most people are looking for loans that will provide them with the best interest rate, the least amount of charges and the lowest points. These variables can make a lender more attractive. A "lock" is when a consumer gets an agreement from the lender to hold a specified interest rate for a specified amount of time. There are several options available to consumers to lock-in mortgage rates.
Once you have decided on your lender, it is time to negotiate the terms of your mortgage loan. During the process of negotiation, you can start by asking general questions about the process of locking-in the mortgage rates. Some areas to cover when speaking to lender about are:
- How long is the loan processing time?
- When are rates locked in?
- How long is the lock?
- What fees are associated with the rate?
- What happens after the expiration period?
- What is the process of documenting the locked-in rate?
These questions will provide a better picture of the responsibilities that both you and the lender have in the process.
There are a variety of options available in creating the terms of the locked-in mortgage rate. Three of the more common options are locked-in interest rate and points, locked-in interest rate/floating points, and floating interest rate and points. The first option is a locked-in interest rate and points. Points are charges that equal a percentage of the mortgage loan amount. This option allows you to lock in interest rates and points that were quoted to you by the lender, regardless if the interest rates increase.
The second option is a locked-in interest rate with floating points. Similar to the first option, the locked-in interest rate with floating points allows the interest rate to be locked, but the points can fluctuate with the market. You can eventually lock your points in at whatever that current rate is at that time of settlement.
The third option is a floating interest rate and points. This option allows you to hold out for a lower rate and points before settlement. However, if the interest rate and points are high, you will have to lock-in on those rates in order to close your loan.
Guaranteeing the Rate
Once you have negotiated the terms of your mortgage loan and locked-in the rate, you will have to go through the loan approval process. There are ways you can assist in the process and ensure that you get your quoted interest rates and points. The first step is ensuring that you have all the necessary documentation needed to process your loan. Incomplete documentation can hold up the approval process and jeopardize your locked-in rate. The second step is to be in contact with your lender. Providing a line of communication allows you to remain informed about the status of your loan and assist the lender with any information they may need to complete your application.
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