Lock and Quotes in Times of Rising Rates

In this climate I think it is very important that you understand what it means when you lock in an interest rate. I say it is important because rates are rising and if you get a telephone quote offering a particular interest rate; you want to make sure you know it is locked in if that is what you want.

When you lock in a rate you’re asking your lender to hold that rate for you for the next 30, 45 or 90 days. The idea being that you’ll close within that time frame. The longer the lock period the higher the rate you’ll be offered. This is because lenders want to make sure they get the most out of the money they’re lending you. Risk increases with time, since the more distant into the future the more risky life is. You might lose your job, your spouse might get sick, and the neighbors stove might catch fire and take your yard out with it. Since, all these events affect your ability to get the loan and close on time, lenders will want a higher interest rate.

A lock is an agreement between you and your lender that the offered rate is held for you for the specified time. A rate quote from a broker or a banker is not a lock. You must and should specify that you would like your rate to be locked – if that is what you desire. It is your responsibility to make sure the lender is aware of your desire and the lender understands your request.

Rates are not rising like crazy, but it is rising at a pace that can have an effect on whether you can afford the new house or pay off some debts!

Let me know if you have any further questions on this topic. You can always e-mail me.

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