When Should I Lock My Mortgage Interest Rate?

Whether refinancing your home mortgage or getting a new mortgage to purchase a home in Santa Barbara, San Luis Obispo, or Ventura counties, or anywhere else in the state of California, the question of when to lock your rate should be considered carefully. I can help you make an informed decision, for your situation.

For more information on what a rate lock period is, and the various types of mortgage rate locks, click HERE.

Typically home buyers don't want interest rate surprises, and want to know with certainty what their mortgage payment will be in the end, so for clients buying homes in purchase transactions, I usually recommend that they lock in a rate as soon as possible after their purchase contract is set. The mortgage markets can be very volatile at times, and are subject to swings—good and bad—based a huge number of factors, including movement in the bond and fixed-income investment market, movement in the stock market, changes in inflation numbers, changes in employment numbers, and world news, to name just a few.

Borrowers can also choose to not lock their rate until farther into the loan approval process. In the mortgage industry this is called "floating". Refinancers have a little more flexibility, because if rates start heading up dramatically, they can choose to delay completing the loan until rates settle down, or in the worst case, not complete the loan. Generally speaking, if the combination of interest rate and points that I am quoting you is attractive, and where you want them to be, then I will always recommend that you lock at that time.

In the short run, you can also monitor the financial markets and read more about news affecting mortgage interest rates on my Daily Rate Lock Advisory by clicking HERE. Generally speaking, good news is bad for mortgage interest rates, and bad news is good for mortgage interest rates. If you are floating, and the Advisory mentions that the Fed (also known as the Federal Reserve) will be making an announcement soon, then it can be advisable to lock before the announcement, unless you are fairly certain that the announcement will work in your favor. Oftentimes the announcements disappoint financial markets, and rates quickly rise afterwards. Likewise, if the Advisory mentions that unemployment or inflation reports are coming out soon, it can be advisable to lock before the announcement, unless you are fairly certain that unemployment figures will stay high, and inflation figures will stay low.

As your mortgage broker and mortgage specialist, I can help you understand the financial markets, to help you choose an appropriate time to lock your interest rate. As always, thanks for your interest.