Your offer’s been submitted and the seller’s countered. Expect to do some negotiating over the next day or two until you come to the final terms.  Once the seller’s have signed the agreement you are ready to proceed! Your next call should be to your family to tell them the great news and then to your mortgage consultant to discuss locking terms. Now is the time to lock in your interest rate. You won’t want to play the rate game at this point and float your rate.  Buying a house can be very stressful and most likely the largest purchase that you will ever make.  Unless you are a thrill seeker, or a serious gambler, you should lock in your rate to eliminate that part of the stress. There are no experts willing to guarantee in writing the direction of mortgage interest rates over the next 30-60 days (your time period until closing). Mortgage rates change with the stock market. They are based on worldwide economic reports and events and can change every day and often change during the day as well.  Once the interest rate is locked in, if interest rates improve, you may be able to take advantage of the lower rate before closing. Make sure you discuss this with your mortgage specialist.

The best way to lock in a great interest rate:

You may think it is a good time to go online and fill out rate quotes and/or shop for a mortgage. But, this is not the time and is much more difficult than it seems. Unless you provide a loan application and allow specialists to pull your credit, the quotes that you get won’t be worth the paper they’re written on. Any quote given without a loan application is a “best case scenario” and won’t be guaranteed. Also, interest rates and pricing move every day and often, many times during the day.  So, you can get a quote at 10 AM, and due to one or two price changes during the day, when you call back at 4 PM to lock in the rate, closing costs could have increased by $100s or even a $1000+ in order to keep the interest rate the same. This can also work in reverse. For instance, you call at 10:00 AM for a quote and then at 1:00 PM the market moves and the pricing gets better. At 2:00 PM you get a quote from another competitor and it is $500 less in closing costs so you tell them to lock you in because you think you are getting a better deal.  Had you called your mortgage specialist back to see if the market had moved, you would have been told that the rates had improved and now the closing costs have dropped by $1000.  It is not a matter of not giving you the best quote possible, it is a matter of ongoing fluctuations in the stock markets.

Since cost estimates are sent out every day and rates change all the time, it wouldn’t be feasible for the mortgage specialist to send out notices every time pricing changes unless you specifically request it.  If you are comparing quotes from more than one company for the same program and the same interest rate, the only thing that really needs to be compared is the “adjusted origination fee”.  Starting in 2010, the government changed the way good faith estates are prepared. It used to be that when shopping quotes you would get lender/broker fees such as: underwriting fee, processing fee, points, etc.  In 2010, it was consolidated into one figure to make it easier to compare.  And, that figure is the “adjusted origination fee”. The other fees on the quote can be manipulated to look lower and will be what they will be regardless of where you go for your loan. The only thing you should do with this information is to check to see who is preparing their quotes accurately.  If you get one with incorrect fees and costs, beware.  If they make mistakes trying to get your business, what kind of mistakes might be in store for you if you decide to go with them for your loan?

Justin McGuire
Mortgage Expert

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