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If you've been exploring mortgage options, you've likely discovered a key truth about interest rates: Today's rates might not be available tomorrow. A mortgage rate lock ensures that the interest rate on your mortgage remains constant from the initial quote until closing. Even after locking in your rate, you still have the flexibility to switch lenders. Here's what you need to understand about rate locks.
Orion Lending (Orion) is a Nationwide Wholesale Mortgage Lender founded by proven industry leaders who bring a legacy of success and ambition to Mortgage Banking. Orion combines innovative technology, a wide array of products, personal touch service coupled with competitive pricing that hyperspeeds the growth of our business partners.
Innovation is the heart and soul of this leading organization. Orion has enhanced its cutting edge, proprietary STAR Broker Portal tech yet again! Approved Broker Partners will now be able to leverage the NEW QuickLock feature and lock a loan in seconds directly from the QuickPricer without the NEED to upload the 3.2 OR 3.4 FILE!
Orion has continued innovate the STAR Portal, with over 400 unique features added this year alone. Additionally, Orion has recently experienced nationwide expansion including now being licensed in 50 states, with team members in 40 states and fulfillment centers on the East and West Coast.
“Becoming the Lender of Choice for our Broker partners is what drives us to continually look for ways to add value and efficiency for our customers. Our Quick Lock technology is a prime example of this. By shaving minutes off the time it takes to lock a loan, down to just a few seconds, this solution allows brokers to react to market conditions lightning fast. ”, said Tracey Corbett, Orion Lending Executive Vice President of Strategy.
Along with Orion's avant-garde QuickLock feature, approved Broker Partners have a quarterback (Account Manager) to ensure your loan gets to the finish line, Underwriters that call you and a dedicated Support Team, just for YOU. If you are interested in accessing the new QuickLock feature, please reach out to your Orion Account Executive.
The mortgage market is often unpredictable, making a mortgage rate lock a wise decision. It ensures that your interest rate remains fixed for a specific duration, typically from when you make an offer until the closing, provided there are no changes to your application.
For instance, if your lender locks in your rate at 6.68 percent for 45 days and rates rise to around 7 percent during that time, you’ll still secure your loan at the lower rate — assuming you close before the lock period expires.
It’s generally up to you to request the rate lock, and opting out isn’t always a poor choice, especially if interest rates are declining or generally low. It largely depends on the market conditions when you purchase and your risk tolerance.
Various factors contribute to mortgage rate fluctuations, including the economic climate, housing demand, financial markets, and Federal Reserve actions:
The timing for locking in a mortgage rate varies by lender. Some lenders allow you to secure a mortgage rate lock once you are preapproved and have identified a potential property. Others might wait until the seller has accepted your offer.
However, locking in too early could lead to surpassing the expiration date, resulting in extension fees or a new rate. Therefore, if you're just beginning your property search, it might be wise to delay the rate lock to avoid feeling pressured to quickly find a home and close the loan.
Remember: A lender can cancel a rate lock if there are changes to your credit report or mortgage application between the time of your agreement and the final underwriting process.
While 30-day and 60-day rate locks are common, you might also find options for longer lock periods.
Naturally, opting for a longer lock period often comes with a higher fee. However, in some scenarios, this cost can be justified. For example, borrowers of construction loans might benefit from securing an eight-month rate lock, potentially saving money in the long run as interest rates rise. In other situations, it might not be worth the additional expense.
If you're approaching the expiration of your mortgage rate lock period and require additional time to finalize your home purchase, you have the option to pay for a rate lock extension. This fee is generally calculated as a percentage of your loan amount, with costs increasing for longer extensions. It's often more cost-effective to opt for a longer rate lock initially rather than purchasing an extension later.
Depending on your lender’s policies, you might be able to secure the lower rate. Along with a standard rate lock on a mortgage, some lenders offer a float-down lock, which is designed to help you take advantage of lower rates if they become available before you close the loan.
This seems like a win-win — your rate can only decrease — but there will be some fine print. For example, you’ll generally pay a fee for a float-down lock, so you’ll need to make sure that the potential savings are worth the expense. And lenders typically require rates to fall by a certain amount before activating the float-down option. If rates fall by a tiny amount, it might not be enough to decrease your locked rate.
Moreover, understanding the specific terms of a float-down option is crucial. Each lender has unique policies regarding how much the rates need to drop before the float-down can be activated and what costs are associated with it. Additionally, the float-down lock might only be available for certain types of loans, such as fixed-rate mortgages or loans with longer lock periods. It's advisable to discuss these details thoroughly with your loan officer to assess whether a float-down lock aligns with your financial goals and risk tolerance. Evaluating the potential benefits against the costs involved can help you make an informed decision on whether to pursue this option.
Before you get a rate lock, your lender will usually review your finances, including your:
After verifying your financial records and reviewing your application, your lender can quote you a rate and any fees to lock it. If everything looks good to you, simply submit a request to lock in the rate.
This thorough review process is essential because it allows the lender to assess the risk associated with lending you money. By understanding your financial situation in detail, they can offer you an interest rate that reflects your creditworthiness and financial stability. Once your rate is locked, it provides you with the peace of mind that your interest rate will not increase before your loan closes, even if market rates rise. However, it's important to be aware of the expiration date of your rate lock and any potential fees for extending it, as these can impact your overall loan costs.
Rate locks aren’t free, but that doesn’t mean you’ll necessarily see a line-item charge for them. The lock’s cost is often baked into the rate you’re offered. If your lender does charge for one, it will likely be — or be equal to — a quarter to half a percent of your loan amount.
However, lenders usually charge a fee for extending the rate lock period beyond the standard 30 or 60 days. Ask about what to expect if you need to extend the lock.
The cost of a rate lock can vary significantly based on the lender's policies and the length of the lock period. It's crucial to understand these costs upfront to avoid any surprises. Some lenders may offer a complimentary rate lock for a short period, but charge fees for longer durations. It's also worth noting that the rate lock cost can be influenced by market conditions; during times of high volatility, lenders might increase fees to mitigate their risk.
Additionally, if you're considering a float-down option, this could add to the overall cost of your rate lock. The float-down fee is typically separate from the standard lock fee and can be a worthwhile investment if you anticipate a significant drop in interest rates.
When discussing rate lock costs with your lender, inquire about any potential hidden fees, such as those related to changes in your credit profile or loan terms during the lock period. Understanding the full scope of costs associated with a rate lock will help you make a more informed decision and manage your mortgage loan expenses effectively.
Given the upward climb in mortgage rates over the past few years, a mortgage rate lock is often a smart choice.
Consider if you lock in a 7 percent 30-year rate for a $300,000 loan. At this rate, you’d pay $418,527 in total interest. Now, let’s say you don’t lock your rate and rates rise to 7.25 percent by the time you close. For the same mortgage, you’d pay $436,750 in interest — a difference of $18,223. With that said, don’t forget to consider the fees associated with locking your rate, if there are any.
You can use Bankrate’s mortgage calculators to get a sense of what you’d pay based on your rate lock.
Additionally, securing a mortgage rate lock can provide peace of mind in a volatile market. With economic uncertainties and potential rate hikes, locking in a rate ensures that you are protected from sudden increases that could significantly impact your monthly payment and overall loan cost. It's important to weigh the benefits of a rate lock against any associated fees, as these can vary depending on the lender and the length of the lock period.
Discussing your options with a knowledgeable loan officer can help you understand the best strategy for your financial situation. They can also explain the implications of different lock periods and how they align with your expected closing timeline. In some cases, opting for a longer rate lock may be beneficial, especially if your home purchase or construction is expected to take longer than usual.
Moreover, if you anticipate that interest rates might fall, inquire about a float-down option. This feature can allow you to benefit from lower rates after your rate is locked, potentially saving more money over the life of your loan. However, it's crucial to understand the terms and costs associated with a float-down, as it may not be available for all loan types or may come with additional fees.
Ultimately, deciding whether to lock in a mortgage rate should be based on a careful assessment of current market trends, your financial goals, and your risk tolerance. By taking these factors into account, you can make a more informed decision that aligns with your long-term financial plans.
In conclusion, mortgage rate locks play a crucial role in providing financial security and predictability for borrowers navigating the often volatile world of mortgage interest rates. By securing a rate lock, borrowers can shield themselves from potential rate hikes, ensuring their monthly payments remain stable throughout the loan term. This stability is particularly valuable in uncertain economic climates, where interest rates can fluctuate significantly.
Moreover, the availability of options such as longer lock periods and float-down features further enhances the flexibility and appeal of rate locks. These options allow borrowers to tailor their mortgage strategy to their specific needs and market conditions, potentially saving money over the life of the loan. Although there may be fees associated with rate locks, the potential savings and peace of mind they offer often outweigh these costs.
Ultimately, locking in a mortgage rate is a strategic move that aligns with prudent financial planning. By understanding the nuances of rate locks and collaborating with a knowledgeable loan officer, borrowers can make informed decisions that support their long-term financial goals, securing their dream home without the worry of rising interest rates.