Whether you’re getting ready to buy your first home or you’ve done this before, you’ll benefit from discovering the best time to lock in a mortgage rate. Understanding how it works and what it’s for can help make the home buying process a little easier.
When paying off a mortgage, buyers need to pay interest on the money borrowed. The money that you borrow initially is called the principal, and interest gets charged as a percentage of that principal. The interest rate for your mortgage will ultimately determine how much interest you’ll pay over the life of the loan. Therefore, the lower the mortgage interest rate is, the better.
You can choose to lock in your mortgage rate from the moment you select a mortgage, up to five days before closing. Locking in a rate early can help you get what you were budgeting for from the start. As long as you close before your rate lock expires, any rate increase won’t affect you.
Every homebuyer has their own unique circumstances, so there’s no universal time to lock in a rate. It depends on the markets and your financial situation. Some people are more comfortable locking in early on, while others prefer to gamble on fluctuations. One sensible rule of thumb is to lock in your rate when there’s a scenario that works within your needs and budget. You need to assess how much risk you’re comfortable with and go from there.