Shopping for the right mortgage rate is a big part of getting a mortgage that works with you and your budget. Mortgage rates are always fluctuating and will determine how much you will pay on your mortgage each month.
When you meet with a lender you may have the option to lock or float your mortgage rate so you can settle on the right rate for you.
Locking your rate means that it will not change from the time your lender offers it to you until the time you close on your home loan. So if mortgage rates go up, your mortgage rate will stay the same. However you will have to close on your mortgage in a certain time frame and there cannot be any changes to your mortgage application.
Floating your rate means that you will have a one-time option to “float down” your rate to a lower rate if it becomes available to you. You will only be able to do this once, and for a limited time, to be sure that you are ready to float down.
Before you lock or float your home loan, know how it will affect your monthly mortgage payment. Whether high or low, your monthly mortgage payment will be determined by the rate you lock or float to. Even a 1% change can add up, causing you to pay several hundred dollars more or less over the course of a year.
Remember that even a low mortgage payment may not be the best option for you, as it can draw out the amount you will pay over the life of the loan. Be sure not to lock in your mortgage rate too early and always shop around for the best mortgage rates for you.
When you talk to your lender about your mortgage, ask about their mortgage rate options and rate lock programs. If you are taking out a construction loan, you may be able to have the deadline extended. You may have to pay a fee to lock your mortgage rate so check with your lender about what their program entails.
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