Choosing when to ‘lock in a mortgage rate is one of the most critical contract decisions any homebuyer will make. Interest rates as well as the prices of other financial services are ever changing hence the need to time the market in order to acquire the best rates on the loan.
This blog post outlines six things that you should look at when deciding on when to lock in your rate. Balancing these aspects will enable you to look at the best time to achieve optimal savings.
So, continue reading before you look for the best mortgage companies for refinance.
When Rates Are Projected To Rise
Since short-term interest rates are set by the Federal Reserve and mortgage rates usually move in the same direction. When the rates are predicted to rise within the near future, it is advisable to commit yourself to the current rate.
This saves you from hikes that lead to a monthly payment increase. Again, even if rates go slightly lower after the lock-in, you are safe in the understanding that your locked-in rate shields you from even higher rates in the future.
It is advisable not to wait long to lock if the rates start moving up but if they go down, you can normally relock for the lower rate once only. It relocks time cautiously on rate forecasts and closing time.
When Rates Go Low, In The Annual Base
Examining seasonal patterns, buyers typically are able to lock in at rates that are lowest during the last quarter of the year in the late fall and during the winter season.
They usually go down during the cold season as the housing market slows down particularly in the last quarter of the year. Track every day mortgage rates from around the time of the Thanksgiving holiday until the beginning of the spring season.
Thus, when you observe low yearly rates close to the annual minimum, seize this chance. Though you may have to make extension fees to extend the closing date, this can help to achieve massive long-term benefits.
The Moving Up Closing Date
If you’ve locked a rate at 60 days from the closing date but there is a chance to advance the closing date a few weeks more, lock the new time immediately.
It is evident that the duration of the rate lock affects the rate and that shorter durations are associated with lower rates. In fact, some carriers will slash rates by an eighth of a point if you move the closing date forward by seven days.
Within 45 days to the closing, a week can make a difference of 0.125 percent or more. Always track the rates for 15, 30, 45, and 60-day lock to lock the shortest available period.
Three Weeks Before Closing
Knowing the best rated reverse mortgage companies, rates analysis on the historical data highlight that rates usually ease down slightly in the last three weeks to the close. This is more so during the winter season and may be attributed to various reasons.
Towards the end of this cycle, ask your lender if it’s better to wait for the rates to lock or lock them immediately. Try comparing a 10-day, 15-day or 20-day lock in to see if higher rates can be obtained. Make sure it specifies that the lock period applies to the closing date that has been agreed upon in the last phase.
However, rather than be cautious rates may go up instead, and in most cases, waiting to the three-week sweet spot can save up to 0.125 percent or more compared to locking a month ahead.
Conclusion
The best time to lock your mortgage rate cannot be stated as a general rule since it depends on the market conditions, the time within which the closing has to be done, and the loan program that is available.
When comparing primary mortgage rate averages with your specific home purchase profile, consider the above factors. It is therefore important to time your lock so as to get the best out of it.
Recording daily rate fluctuations in detail prepares one for the opportune time, whether it is to capitalize on a short-term drop or cover before a spike.
