The Best Time to Lock in Mortgage Rates

Buying

Purchasing a home usually means following a predetermined schedule. Often, contracts require the loan approval and lock-in of the interest rate by a certain date. Many lenders require homebuyers to have an address and a purchase contract before they lock the loan. Timing the best interest rate is tricky with these constraints. Watching the economic news can give you a hint of what might happen to interest rates, but nothing is certain.

Refinancing your home allows you to be more selective on the rate lock. You can obtain credit or even full approval and then attempt to time the market for the best rate. The disadvantage of waiting to lock your loan is that rates could increase and take away the reason to refinance. Obtaining loan approval requires time and money for all of the parties involved, including you. Many lenders require the borrower to purchase the appraisal before they will approve the loan. If you wait for loan approval to lock the loan and rates rise, you could be out $350 to $500 for an appraisal without a new low rate to show for it.

Negotiating your mortgage rate usually is more productive than waiting to time a dip in interest rates. Rates are not universal among all lenders. Some lenders offer better rates than others do. Because of this, it is important to obtain several quotes and negotiate the mortgage rate and closing costs. Usually, you can complete this over the phone simply by asking for a lower rate and fees. Mentioning that a competitor is willing to lower the costs and rate helps as well. Ask each lender to beat the best rate and closing costs offered. Keep asking until you find the best possible loan rate, terms and closing costs.

The Internet offers many tools for tracking interest rates, both short and long term. Freddie Mac, the nation's second largest mortgage investor, publishes historical interest rate data back to 1971. Since these are historical data, not current rates, use this only to watch trends, not predict what will happen with rates. Many companies offer current rates online. Watching the online rates move daily provides you with information on which to base your decision.