Contrary to popular belief, the FHA does not control when you can lock your interest rate. Each lender has its requirements for rate locks.
Locking in your interest rate means you agree to a set interest rate for a specific period. This can be helpful if you are worried about rates going up, but it can also mean you miss out on lower rates if they drop. Once you have a signed purchase contract and pre-approval from a lender, you can lock in your interest rate.
What Is a Rate Lock?
A rate lock is when a borrower locks in their interest rate with a lender for a certain period. This is done so that the borrower knows what their interest rate will be when they go to close on their loan. The most common lock period is 30 to 45 days. This means the borrower locks in their interest rate 30 to 45 days before their loan closing date.
Lenders typically do not charge anything for a lock period of this length. If the borrower’s rate lock expires and they still need to get loan approval, they may have to pay for a lock extension. If they don’t, they will be at the mercy of the current market rates. This could mean that they get a lower interest rate, but it could also mean they have to take a higher interest rate.
Deciding When to Lock
When locking in an interest rate, the main factor is how comfortable you are with the rate. Interest rates can go up or down during the time it takes to close on a loan, so if rates go down, you may regret not waiting, but if rates go up, you’ll be happy you are locked in. Choose a rate you’re comfortable with to close your loan confidently.
Lowering Your Interest Rate
If you want to lower the interest rate on your loan, you can pay discount points. Each point is one percent of the loan amount and usually lowers the interest rate by 0.25 percent. Discount points are prepaid interest, and the lender accepts payment upfront for a lower interest rate. This means the lender earns less interest over the life of the loan.
If you know you’ll keep the same loan for a long time, it may make sense to pay for the lower rate. But you can only do this once you lock in a rate. The most important thing you can do before you lock your interest rate is to ensure your loan is in good standing. Go over everything with your loan officer to ensure you provide all the necessary documentation. Make sure you received a written pre-approval that shows the outstanding conditions. The more stipulations you have out of the way before you lock your interest rate, the less time it will take you to close on your loan.
Conclusion
FHA mortgage rates can be locked in at any time, but there are some benefits to doing so sooner rather than later. For one, locking in a rate protects you from potential market fluctuations that could cause rates to rise. Additionally, the sooner you lock in a rate, the more time you have to shop around for the best possible deal on your mortgage. Ultimately, the decision of when to lock in an FHA mortgage rate is up to the borrower, but it is important to keep in mind the potential benefits of doing so sooner rather than later.
Get In Touch With Your Kansas City Mortgage Expert Today!
McGowan Mortgages are your home loan experts dedicated to making sure your home purchase or refinance experience is top-notch. We have helped thousands of families in Kansas City and throughout Missouri to make their dreams come true. We can’t wait to do the same for you! If you need an FHA loan in Kansas, we’d love to help you find the right investment property, Call us today at (816) 631-9687 for more info.
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