When Is the Best Time to Lock in a Mortgage Rate?

So you’re at the point where you’re ready to buy a house and now you need to know when it’s the best time to lock in a mortgage rate? You certainly want to lock in when the rate is lowest because you can literally save yourself thousands of dollars over the life of the loan. However, how do you know when the rate will be the lowest?

Here are a few pointers to help you out.

When Are You Allowed to Lock?

Before you decide to apply for a mortgage at a locked in rate, you first need to know when you’re allowed to lock based on the lender and the terms of the loan you are considering.

Usually, the earliest you can lock in a loan is after you’ve been approved for the loan. There’s simply no point in trying to lock in any earlier because you won’t be allowed to do so.

Unfortunately, loan approvals take time, sometimes up to 4-6 weeks. You could miss out on some low interest rates while you’re waiting to get the final “yes” answer. There’s nothing you can do about that.

When the Offer Has Been Accepted

Once you’ve been approved for a loan, it might be tempting to lock in right away. You might browse through a table of 30 year fixed mortgage rates and see that the rate your mortgage company is offering is very competitive.

However, you should resist doing that if your offer on a home hasn’t been accepted yet.

It’s not unusual at all for real estate deals to fall apart. If you’ve made an offer on a house and the seller hasn’t given approval, wait to lock in until you have a deal. Otherwise, you might lock in way too early and miss out on a much lower rate when you finally have an accepted offer.

Also keep in mind, as you calculate mortgage rates, that your lock period will affect how much you pay for the mortgage. For example, if you’ve got a 30-day window to lock, you might pay only 4.6 percent on the loan with no points. However, if you’ve got a 60-day lock, you might get charged a point or pay a higher rate.

When It’s in Your Budget

When you’ve got an opportunity to seize on a mortgage at a great rate and you’re certain that the monthly payment is suitable to your budget, feel free to go ahead and lock in immediately. Effectively, you’ve won.

Sure, the rate could go down the next day. However, the rate could also go up the next day. The fact of the matter is that you can’t predict what’s going to happen with the economy or the bond market on a daily basis. If you’ve got a mortgage rate that offers you payment in line with the anticipated expenses of home ownership, go ahead and take it.

Home ownership is the American dream. Instead of worrying about getting your mortgage at “just the right rate,” go ahead and lock in at a low rate once you’ve made an offer an a house and it’s been accepted.