"Locking" Your Interest Rate
July 29, 2010
With interest rates at historical lows, should a potential borrower lock the interest rate immediately upon successfully negotiating a purchase agreement? In this market where interest rates have been bouncing around, being able to obtain a "lock" on the current interest rate can be a valuable thing to do.
"Locking" an interest rate is obtaining a guarantee from a lender that for a certain period of time, the interest rate that you are quoted will not change even though the interest rates in the market place change. The lock means that your rate is secured whether interest rates go up or go down.
At one time, lenders would "lock" guaranteeing a rate but with a proviso that if rates decreased, your rate would also be adjusted. Most of the time lenders will not make any adjustments after a borrower "locks" a rate. Since they are willing to gamble that rates will not change significantly, borrowers who lock are accepting the "locked" rate.
Critical factors for a lender willing to "lock" (not all lenders offer this borrower benefit) include a check of borrower's credit, a computerized estimate of the property"s value and generally a verification of the borrower's income. Lenders will not wish to "lock" a rate if it looks as though the transaction might be shaky.
In this market where loan approval may take more than 30 days, it is important to know how long the interest rate can be "locked".
In a volatile interest rate market, some borrower's will to delay locking or not lock at all, taking their chances on what the rate will be when it is time to draw the loan documents.
"Locking" has been available for a very long time and we hope that it will remain a choice that a borrower can make.
With interest rates at historical lows, should a potential borrower lock the interest rate immediately upon successfully negotiating a purchase agreement? In this market where interest rates have been bouncing around, being able to obtain a "lock" on the current interest rate can be a valuable thing to do.
"Locking" an interest rate is obtaining a guarantee from a lender that for a certain period of time, the interest rate that you are quoted will not change even though the interest rates in the market place change. The lock means that your rate is secured whether interest rates go up or go down.
At one time, lenders would "lock" guaranteeing a rate but with a proviso that if rates decreased, your rate would also be adjusted. Most of the time lenders will not make any adjustments after a borrower "locks" a rate. Since they are willing to gamble that rates will not change significantly, borrowers who lock are accepting the "locked" rate.
Critical factors for a lender willing to "lock" (not all lenders offer this borrower benefit) include a check of borrower's credit, a computerized estimate of the property"s value and generally a verification of the borrower's income. Lenders will not wish to "lock" a rate if it looks as though the transaction might be shaky.
In this market where loan approval may take more than 30 days, it is important to know how long the interest rate can be "locked".
In a volatile interest rate market, some borrower's will to delay locking or not lock at all, taking their chances on what the rate will be when it is time to draw the loan documents.
"Locking" has been available for a very long time and we hope that it will remain a choice that a borrower can make.
posted by shirley harry at 7:51 AM
0 Comments:
Post a Comment
<< Home