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Lock In Your Rates

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Posted On: 08/14/2013

Question:

Interest rates rose during May and June. If I want a mortgage today, how do I lock in the rate and how long will it last? Should I lock in a rate?

Answer:

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Generally, you can lock in a rate at no additional cost for 30 days. After 30 days, the lender may want a lock-in fee.

Since lender policies can differ on this issue, be sure to shop around.

The terms of the lock-in are shown in the Good Faith Estimate (GFE), a document given to borrowers by lenders within three business days of application. Look on the first page under "important dates" to see if you have a lock-in and when closing must be completed.

You must take lock-in deadlines seriously. Be certain to respond to lender document requests immediately, keep records showing when items have been requested and when they were sent. Check with lenders to assure materials have been received.

Why? If closing is delayed – or you do not lock in your rate – you could face different loan costs. The interest rate, some loan origination expenses and the monthly payment could all change.

Should you lock in rates? If you think rates are rising, the answer is yes.

If you think rates are falling, then allowing your rate to "float" is the choice for you.

Be aware that some lenders have a one-time “rate re-lock" policy – if you lock in your rate today and interest levels fall before closing, then under certain conditions they may allow you to re-lock at a lower rate. Speak with lenders for specifics.

Most borrowers are best served by locking in rates at the time of application. That way you know your rate and monthly costs with certainty, a real comfort when interest levels are changing.

Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to peter@ctwfeatures.com.

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