When you are shopping for mortgage rates, you have to realize that the terms you are quoted are the terms in force at the time of the quote. These terms may not be the ones available to you at closing, weeks or months later.
Most banks nowadays offer their potential borrower?s a ?lock in rate?. It is only normal to realize that there will be a delay between when the loan is applied for and the home is closed on. The rate of interest is a critical factor in the affordability of a house, so this can be an important point. So a lock in period can be negotiated with your lender, which will keep the rate the same for a certain length of time. This applies to either interest rates and points.
You may be able to lock in the interest rate and points either as you apply for the mortgage, during the processing of the mortgage or when the loan is approved.
An example would be if a lender offered a lock in rate for thirty days at 5.5% interest with one point. This means that even if rates go upincreased, if the borrower closed within that time frame, the rate would stay 5.5 %. This is a normal lock in period, and a lot of lenders offer it to attract borrowers, and are willing to take the risk for this short period of time. However, if you prefer a longer period, you may have to pay since banks do not want to take such a risk for an extended time without getting something in return.
This can go both ways, because if rates go down, you may want to cancel the loan, but the agreement must permit it. This agreement is made when the lock in period is set.
If your mortgage is not settled during the lock in period, it will lapse and your new mortgage or new lock in period will be at the higher rate. If rates have not changed, a lender might consider issuing a new guarantee at the same rate.
You can have a combination of lock ins:
Both rate and points are locked in. The lender guarantees both the interest rate and the number of points for a set period.
Locked in Rate, floating points. The basic rate is fixed for the period, but the bank keeps the right to increase the points. This permits them to charge extra points if they want.
If interest rates are moving a great deal, it is probably a good idea to ask your banker about lock in terms.