What does the term
When a lender “locks” the interest rate, you are guaranteed a specific interest rate for a specific period of time. That period of time is called the lock period.
The lock guarantees your rate as long as your loan closes and funds prior to the expiration date of your lock period. If your closing is delayed beyond your lock expiration date, you might have to pay higher market rates.
It is good advice to lock for a period longer than you need. In other words, lock for a period beyond your actual closing date. This will protect you against any unforeseen circumstances that could delay your closing.
Typical lock periods are 15, 30, 45 and 60 days. In a stable rate environment, shorter lock periods generally provide you a better interest rate.
However, the market can be volatile and rates move with market activity, both up and down.
Let’s look quickly at the three possibilities for rates:
• Rates could go up
• Rates could go down
• Rates could stay the same
If you believe rates may go up, especially by a significant amount, lock as soon as possible.
If you believe rates will go down, you would definitely benefit by waiting to lock.
If you believe rates will stay the same, you may also do better to wait.
Of the three scenarios, you benefit from a longer lock only when rates go way up after you lock.
If you have not locked in when you receive your application, you may notice that the rate on the application is somewhat higher than the market interest rate. You are not committed to that interest rate. Your Mortgage Consultant has intentionally used a higher rate with which to qualify you in the event that rates do go up prior to locking in. You are still approved, and will not have to get re-approved or do any more paperwork.
Once you have a property under contract, you can lock your rate by simply requesting a lock term. HomeBanc will fax or e-mail a confirmation to you and request you sign and return the document within 24 hours. It’s that simple.