07
Nov
By Fred Gruber
Mortgage Tips

When and How to Secure a Favorable Mortgage Rate Lock

Interest rates can fluctuate from one week to the next, and that can have a major impact on your monthly payment and overall loan cost. A mortgage rate lock gives you the ability to secure your interest rate for a set period of time, protecting you from unexpected increases while your loan is being finalized. Understanding how rate locks work can help you choose the right time and terms for your situation.

What a Rate Lock Means
A rate lock is an agreement between you and your lender that guarantees a specific interest rate for a certain number of days, usually between thirty and sixty. This means that even if market rates rise before your loan closes, your locked rate will stay the same. It provides peace of mind during the process, especially when rates are moving quickly.

When to Lock Your Rate
The best time to lock your rate depends on your timeline and how comfortable you are with market changes. Many borrowers choose to lock their rate once they have a signed purchase agreement and their loan application is underway. Locking too early can create challenges if your closing date changes, while waiting too long could mean risking a higher rate. Your lender can help you weigh the timing based on current trends and your specific situation.

How Long to Lock Your Rate
Lenders offer different rate lock periods, typically ranging from thirty to ninety days. A longer lock provides more protection against delays but may come with a slightly higher cost. A shorter lock is usually less expensive but may expire if the loan process takes longer than expected. Choosing the right length depends on your closing schedule and the overall pace of your transaction.

What Happens If Rates Drop
If rates go down after you have locked, some lenders offer a  float-down  option that allows you to take advantage of the lower rate. However, this feature is not automatic and may involve additional terms or fees. It is worth asking about before you commit to a lock so you understand all your options.

A mortgage rate lock is a valuable tool for managing uncertainty and securing stability during your home loan process. By timing your lock wisely and understanding the available options, you can protect your budget and close with confidence.

10
Apr
By Fred Gruber
Mortgage Tips

Why Your Mortgage Rate Isn’t the Same as the One Advertised Online

Shopping for a mortgage can be exciting, but it can also be confusing when you see a low advertised rate online, only to be quoted a different rate when you apply. While this can be frustrating, there are several reasons why your actual mortgage rate may differ from what you initially expected. The good news is that understanding these factors can help you make informed decisions and secure the best possible rate for your financial situation.

Personal Financial Profile Matters

Advertised mortgage rates are typically based on ideal borrower profiles—those with excellent credit, low debt-to-income ratios, and substantial down payments. Lenders assess risk when determining mortgage rates, and factors such as your credit score, income stability, and outstanding debts can impact the rate you are offered. If your financial profile is strong, you are more likely to qualify for the lowest available rates.

Loan Type and Terms Affect Rates

Not all mortgage loans are the same, and different types of loans come with varying interest rates. Fixed-rate mortgages, adjustable-rate mortgages (ARMs), FHA loans, VA loans, and jumbo loans all have unique risk factors that influence the interest rate. Additionally, the term length of your mortgage—whether 15, 20, or 30 years—can affect your rate, with shorter terms generally offering lower rates.

Market Conditions Play a Role

Mortgage rates fluctuate based on economic conditions, including inflation, Federal Reserve policies, and the overall health of the financial markets. Advertised rates may reflect conditions at a specific moment in time, but by the time you apply, rates may have shifted. Staying informed about market trends can help you time your application wisely.

Discount Points and Fees Influence the Rate

Some advertised rates assume that borrowers will pay discount points upfront to lower their interest rates. If the rate you saw online was based on paying points and you prefer not to pay them, your quoted rate may be higher. Additionally, fees associated with loan origination, underwriting, and closing costs can affect the overall cost of your mortgage.

Locking in Your Rate at the Right Time

Mortgage rates can change daily, and a delay in locking in your rate may result in a different rate than what was originally quoted. Lenders offer rate locks to protect you from market fluctuations, but the length of the lock period and any changes in your financial profile can influence the final rate.

How to Get the Best Rate Possible

The key to securing the most competitive mortgage rate is preparation. Here are a few steps to improve your chances:

  • Boost Your Credit Score: Pay down debt, make on-time payments, and check your credit report for errors.
  • Save for a Larger Down Payment: A higher down payment can reduce your loan-to-value ratio, leading to better rates.
  • Compare Lenders: Rates and fees vary, so shopping around can help you find the best deal.
  • Consider Timing: If possible, monitor market trends and apply when rates are favorable.

While the rate you are offered may not always match the one advertised online, there are many ways to position yourself for the best mortgage deal. By understanding the factors at play and preparing accordingly, you can take control of your home financing journey with confidence.

14
Mar
By Fred Gruber
Home Mortgage Tips

APR vs. Interest Rates

If you’re gearing up to dive into the world of real estate, there are a few key terms you’ll want to wrap your head around before taking the plunge. Today, we’re demystifying APR and interest rate, two crucial concepts that can impact your home-buying journey. Don’t worry, I’ll break it down in simple terms so you can confidently navigate the process like a pro.

Interest Rate:

Let’s start with the basics. The interest rate is the percentage charged by a lender for borrowing money to buy your home. It’s essentially the cost of borrowing the principal amount. When you’re comparing loan offers, you’ll often see this prominently displayed. A lower interest rate generally means lower monthly payments, which can be appealing, especially over the long term.

Annual Percentage Rate (APR):

Now, let’s add another layer of complexity with APR. APR includes not only the interest rate but also additional fees and costs associated with securing your mortgage. This could include things like origination fees, points, closing costs, and mortgage insurance premiums. Essentially, APR gives you a more comprehensive picture of the total cost of borrowing over the life of the loan.

So, what’s the big difference when it comes to buying a home?

Interest Rate is like looking at the sticker price of a car. It’s the upfront cost you’ll pay for borrowing money, expressed as a percentage.

APR, on the other hand, is more like the total cost of ownership of that car, including taxes, registration fees, and maintenance costs. It gives you a clearer picture of the overall cost of borrowing by factoring in those additional expenses.

Why does this matter in the context of buying a home?

Well, let’s say you’re comparing two mortgage offers:

·       Option A has a lower interest rate of 3.5%.

·       Option B has a slightly higher interest rate of 3.75%, but it includes points that lower the rate and have lower closing costs overall.

At first glance, Option A might seem like the better deal because of its lower interest rate. However, once you factor in all the additional costs included in the APR, Option B might end up being more affordable in the long run.

Understanding the difference between APR and interest rate empowers you to make informed decisions when comparing mortgage offers. It allows you to see beyond the headline numbers and consider the full financial picture.

So, as you prepare for your home-buying journey, remember to look beyond the interest rate and pay close attention to the APR. It could save you thousands of dollars over the life of your loan and ensure you’re making the best financial decision for your future.