When should you lock in your interest rate?

by Julia Miller Posted in Home loans /   June 23, 2014


Many people ask their loan officers, "When should I lock in my rate?" There's no easy answer. It's a little like asking when you should sell your stock or which mutual fund will perform better. It all depends on the market and your individual situation.

Are you a well-qualified buyer? If you believe that rates are going to stabilize or improve, it might make sense to wait to lock in your interest rate. However, less qualified buyers need to keep in mind that rising interest rates may impact their ability to qualify for a mortgage. If you think you're going to be close to the maximum permissible debt-to-income ratio, it might make sense to lock your rate regardless of projected decreases in interest rates. Sound complicated? Your loan officer can help you understand how much home you can afford at today's rates and help you better understand the risks and rewards of locking your interest rate or letting it float.

Loan Officer and Homebuyer

Interest rate lock basics
When a loan's interest rate, points, fees and rate lock expiration date are agreed upon by the borrower and lender, the loan is considered "locked." Before the program and terms are "locked," the loan is considered to be "floating," at which time the homebuyer's rate can be affected negatively or positively by market shifts.

Once your loan is locked, if the market shifts and rates rise—even before you close—your interest rate will not increase. That being said, you will still end up with the rate you agreed upon should interest rates drop.

What to keep in mind
The best advice is to keep an eye on interest rate movements in the weeks and months before you plan to secure a mortgage. Have rates been generally rising or falling? When experts are predicting interest rate hikes in the coming days, you may choose to lock sooner. Or, if rates are steadily dropping, you may choose to wait until the last moment. There's no way to guarantee which way rates will shift, but staying in tune with the market will help you make an educated choice. Of course, as mentioned before, less qualified borrowers may not have the luxury of waiting for potential decreases and may want to lock in a rate while they can!

The exception
Depending on what your lender has available, you may be able to consider a float down option. With a float down, you lock in your interest rate, but are allowed to "float down" to a lower rate one time before you close if rates decrease. There is usually a non-refundable up-front fee associated with a float down option.

Still not sure what to do? The decision to lock is ultimately a personal one, but consult your loan officer to discuss the lock options associated with your loan. Our affiliate, HomeAmerican Mortgage Corporation, would be happy to walk you through your choices. Call 866-400-7126 today.

Searching San Diego real estate? Find luxury in San Elijo

by Julia Miller Posted in Local homebuying /   June 16, 2014


At the highest point in North County is a master-planned community getting a lot of attention from San Diego area homebuyers. San Elijo Hills goes beyond the typical clubhouse many new home construction sites offer and takes neighborhood design to the next level.

Clean master bedroom

What's often missing in new home communities today? A charming small-town atmosphere. At the heart of San Elijo Hills is a convenient town center, an urban space providing the services and local flavor necessary to any small town. Residents can gather for lunch at the deli, pick up groceries and drop off dry cleaning.

Outdoor spaces
Next on the list? Outdoor spaces where neighbors can explore and enjoy recreation. With over 1,115 acres devoted to open space and 18 miles of walking and hiking trails, this community offers endless opportunities to take in vistas of the Pacific Ocean and see the sights at local canyons.

Clean master bedroom

Beautiful construction
Last but not least, the new homes themselves at San Elijo Hills are designed for timeless beauty and sophistication. As one of the primary builders at the masterplan, Richmond American's homes will feature enchanting architecture inspired by the French countryside, Tuscany, Colonial Spain and the American Craftsman movement. The floor plans are expected to feature up to 7 bedrooms and up to approx. 4,200 sq. ft.

For more information about all aspects of this brand new master-planned community, visit the San Elijo Hills website.

To start your home search, visit the neighborhood page at RichmondAmerican.com. Be sure to join the growing interest list for updates on development!

How to buy a home

Facebook Image Pinterest Twitter YouTube Google Plus

Attention first-time homebuyers

First-time homebuyer guide Take the guesswork out of buying a home with our Free 19-page homebuying guide.

Topics include:
  • Basics of homeownership
  • Credit score tips
  • Budget worksheet

Get it now
The How to Buy a Home site is a service of:
Facebook  Facebook Pinterest  Pinterest Twitter  Twitter YouTube  YouTube Google Plus  Google+

All content provided on this site is for informational purposes only. It does not constitute legal, tax, accounting, financial or other professional advice. Homebuyers should contact an accountant, attorney, tax professional or other advisor to discuss their particular circumstances prior to making a purchase or financing decision. Richmond American Homes makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site, and will not be liable for any losses, injuries, or damages from the display or use of this information.

Affiliated Businesses: Click here for information on our affiliated businesses.
HomeAmerican Mortgage Corporation: Click here for licensing information and disclosures.
American Home Insurance Agency, Inc. (also known as AHI Insurance Agency): Click here for licensing information and disclosures.