Locking In The Interest Rate On Your Mortgage

Locking in​ the​ Interest Rate on​ Your Mortgage
Many people purchasing homes are surprised to​ learn how quickly interest rates can change .​
This brings up the​ subject of​ locking in​ the​ interest rate on​ your loan .​
Locking in​ the​ Interest Rate on​ Your Mortgage
Contrary to​ popular opinion,​ interest rates for mortgage loans are not set by the​ Federal Reserve Bank .​
This assumption,​ however,​ is​ understandable given the​ uproar one tends to​ see in​ the​ media every time the​ Chairman of​ the​ Federal Reserve makes any mention whatsoever about raising or​ lower rates .​
Of course,​ you​ should understand he is​ discussing the​ rate that will be charged by banks to​ borrow from other banks .​
Interest rates on​ mortgages,​ on​ the​ other hand,​ are set by the​ bond markets among other indicators.
Since bond markets move every business day,​ the​ mortgage rates move in​ a​ corresponding matter .​
Even a​ tiny change can impact how much or​ little money a​ lender will recover given an​ assumed payback of​ a​ 30-year loan .​
To protect yourself from these fluctuations,​ you​ must understand how to​ lock in​ the​ interest rate on​ your loan .​
A mortgage cannot be finalized until the​ interest rate is​ locked .​
If you​ don’t address the​ issue with the​ lender,​ the​ rate can move up or​ down every day from application to​ the​ actual funding of​ the​ loan .​
This can literally be two or​ three months if​ you​ are getting pre-approved before making an​ offer on​ a​ home .​
This kind of​ volatility is​ dangerous,​ particularly if​ you​ are pushing the​ limits of​ your cash flow in​ buying a​ home .​
If rates increase half a​ percent while you​ are shopping,​ you​ may be unable to​ make the​ monthly payments when you​ finally buy the​ property of​ your dreams!
Locking in​ a​ loan is​ all about points and the​ length of​ the​ lock .​
These issues are negotiable with the​ lender,​ to​ wit,​ there is​ no legally required standard .​
To lock in​ a​ rate,​ you​ often must agree to​ pay a​ percentage of​ points .​
The longer you​ want to​ lock in​ the​ rate,​ the​ more you​ pay .​
For a​ 30 day period,​ you​ can expect to​ pay a​ quarter to​ a​ half of​ a​ point .​
For a​ longer period,​ expect to​ pay half to​ a​ full point .​
a​ point is​ one percent of​ the​ total loan .​
If a​ lender tries to​ charge you​ more,​ take your loan elsewhere or​ get a​ mortgage broker involved .​
Fluctuating interest rates are dangerous since they can impact your month payments .​
Locking in​ your rate gives you​ a​ definitive figure to​ work with when buying your dream home.
Locking In The Interest Rate On Your Mortgage Locking In The Interest Rate On Your Mortgage Reviewed by Henda Yesti on July 02, 2018 Rating: 5

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