Let me start by saying, if I knew in advance when interest rates would move up or down, I would be so in demand that I would not have any time to write this blog. There is no guaranteed way to determine the perfect moment to lock in your interest rate.
You are able to lock your interest rate when you apply for the mortgage. The lock-in window starts for every mortgage consumer when a loan application begins the approval to closing process. Standard industry rate lock periods are 60 calendar days or less from the date of your application. If you do not lock your rate when you apply, you can choose any date up until a few days before closing to pull the trigger and lock in the rate.
The reason people choose not to lock the rate when they apply is that they do not want to miss the opportunity to secure a lower rate if rates go down before their closing. This can be a risky strategy even in stable interest rate environments because so many variables have the potential to upend a trading day and push rates higher.
Homebuyers are often real estate consumers for weeks, months or longer before they become mortgage consumers. During the home buying decision, monthly payments based on current interest rates are used to measure affordability. Not locking the interest rate jeopardizes your original home buying decision tree.
Almost every mortgage consumer grapples with the question of what happens if they lock in their interest rate and then rates go down. They want to know if they can unlock and then re-lock at a lower rate, they want to know the secrets to the lowest rate. Nobody ever asked me for the almost best rate, everybody wants the lowest rate available and to find out just how to go about making that happen.
Here is what I know – I don’t know.
In fact, no one knows what the interest rates are going to be tomorrow or next week or a couple of days before closing. I don’t know what the results of the employment report or retail sales or any other economic report will be before it’s released. I don’t know how the financial markets will respond to global economic and political events, but I do know what the interest rates are today. I know that if the rates today are the same as the rates used when deciding to buy that house, and if the numbers worked then, the numbers work now, it is in your best interest to lock in your rate.
Remember that forecasting interest rate movements is the domain of very smart, diligent financial people and even they are not always right. Stick with the formula that says, if the numbers worked then, they work now. By locking in your rate when you know it fits into your budget, you can also lock in your peace of mind and focus on finding your dream home.
The best advice? Don’t attempt to “play the market.” Are you ready to embark on the home buying journey? Start the process by contacting a local Univest Home Loan Consultant at 877-723-5571 or complete a quick online application on the Univest Home Loans website.
Univest Bank and Trust Co. is an Equal Housing Lender. NMLS #415882