Should I lock in rate for home loan?
Justina asked:
I’ve been pre-approved for a home loan from my credit union. However, I’m still looking at houses and haven’t made an offer yet on any of them. If I lock in the rate of 6.125 with my credit union, I’ll have to cough up $500 for the application fee. Should I wait until I’ve found a house? Also, I want to shop around to try to get the best loan so is it wise to lock in a rate when I’m not sure I even will use my credit union?
Also the $500 is refundable if I end up closing the loan with the credit union.
This rate is for a 7-Year ARM.
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I’ve been pre-approved for a home loan from my credit union. However, I’m still looking at houses and haven’t made an offer yet on any of them. If I lock in the rate of 6.125 with my credit union, I’ll have to cough up $500 for the application fee. Should I wait until I’ve found a house? Also, I want to shop around to try to get the best loan so is it wise to lock in a rate when I’m not sure I even will use my credit union?
Also the $500 is refundable if I end up closing the loan with the credit union.
This rate is for a 7-Year ARM.
May 17th, 2010 at 1:24 am
NEVER PAY FEES UP FRONT!!! The only acceptable thing to pay for before the loan closes is an appraisal. And you pay that to the appraiser, not the bank.
Additionally, rate locks expire, typically in 21 days, 30 days, or 45 days depending on the lock. Again, this is free. If you have not found a property, the lock isnt going to make a difference. By the time you get to escrow and get the transaction completed you will have to pay for a rate lock extension.
May 19th, 2010 at 1:00 am
Rates are rising and will probably continue to do so. If I were you, I’d buy the rate lock. 6 & an eighth is an excellent rate and that may not be available in a week. I’d lock in. Just my 2 cents.
May 21st, 2010 at 2:13 am
I recommend that you never pay any company an application fee, credited at closing or not, because that way they don’t have to deliver anything in the event you choose not to borrow from them. It’s a way to earn fees by NOT doing loans.
As for the market, the worsening trend finally broke on Wednesday of last week and has improved since. I tend to advise against fighting a trend. This afternoon’s close will tell us a lot more, but with the home builder’s confidence report showing a 16-year low today, it’s a good bet that there will continue to be more improvement. Furthermore, one would have to know how long to lock the rate, and you wouldn’t know for sure whether you need to pay extra for a longer lock or can save money with a shorter lock, so in this interest rate environment, it’s not wise to risk any money for a lock with the company that may turn out not to have the most competitive product when you have the house under contract and know the closing date.
May 22nd, 2010 at 9:51 am
Lock in rate is more beneficial. A nephew used the variable rate, so when interest rates went up, so did his monthly payments. We had to pay, recently, $500 down as an earnest payment when making an offer on foreclosure. Not sure I like that, either, cause it was paid to the realtor and if we back out after they approve our offer, we lose it! We get the money back if they accept another offer. I think if you call a reputable realtor in your town and ask them for advice, they will tell you what’s the best way to go also and will help you find the right house with a price you can afford. Good luck!
May 25th, 2010 at 6:56 pm
6.125% is an incredible rate if we are talking about a 30 year fixed rate. However, most locks are only 30 days in length so without a home- it probably wouldn’t help you to be locked in at this point. I would guess that the 6.125% WAS the rate when you initially were pre qualified for the loan as I find it hard to believe they will still honor that rate. Finally, I would NEVER pay an application fee to anyone for anything. It is a complete junk fee to get them paid if you do not close the loan with them. No money is needed on a standard rate lock. Find your home, shop for the rate with 3-4 people (be sure to ask the Credit Union if that rate is still available as I’m guessing it is not), choose your lender and go from there. Don’t compare closing costs as they are generally the same regardless of lender outside of application fees and/ or origination and broker fees.
May 29th, 2010 at 3:06 am
Hello,
Don not lock your rate until you have found the home you want. You can float the rate and get a better rate once you get closer to close. There are lenders that will not charge you application fees or rate lock fees. The longer the rate lock period the higher the rate.
Try or