What in the world is a rate lock?

One of the major decisions we will make together is when to “lock” your loan. This isn’t something you have to worry about right now but I thought I would take a few seconds to explain how this works. Once you find a home and have an accepted offer, you’ll have the option to “lock in” an interest rate.

So, what does “lock” mean?

I often use the “Gasoline” analogy to describe the interest rate locking process. Locking your interest rate is a lot like getting gas at the pump. One day you drive by the gas station and gas is $3.00 per gallon. You’re not on empty so you drive right on by instead of filling up. Three days later you drive by the same gas station and now gas is $3.30 per gallon. What happened? As you may know, the price of oil is constantly changing depending on economic conditions, the stock market and the rules of supply and demand. You’re upset that it shot up so you take a chance and drive right on by again. Two days later you drive by the same gas station and now gas is $3.05 per gallon. You pull over, fill up your tank and give yourself a high five for not settling for the higher price.

Mortgage rates are very similar to gasonline.

As the stock market changes from positives to negatives the interest rates that lenders offer can rise or fall accordingly. Luckily, you don’t have to worry about your interest rate changing every month because before you finalize your mortgage, you’ll be able to “lock” in an interest rate for the life of the loan. Unless of course you choose a variable interest rate, then your rate could change at specified intervals. If you’re considering an adjustable interest rate be sure to talk to me about it so you completely understand the risks involved.

Once you’ve got an accepted offer we can discuss your options on locking in an interest rate. Until then, happy home hunting!

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Nick Magiera

Author Nick Magiera

Mortgage Banker by trade, Nick Magiera epitomizes integrity, energy, hard work, and creative service in every detail of the real estate transaction. Nick is a family man with a devotion to God, his beautiful wife & his adorable Bernese Mountain Dog.

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