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when are interest rates locked in

When Are Interest Rates Locked In? Read to Find Out

Written by Altitude Home Loans on . Posted in Mortgage Interest Rates.

Mortgage rates fluctuate daily, sometimes even hourly. A mortgage rate lock, or rate protection, locks in your mortgage rate, keeping it from rising from when you apply for your mortgage to when you close on your loan. But when you’re buying your home, exactly when are interest rates locked in?

Timing is imperative when choosing to lock your mortgage rate because if you lock it and the rates decrease, you still pay the original rate. 

Here at Altitude Home Loans, our team of trustworthy mortgage brokers in Tucson, Arizona, is here to guide you through the process of purchasing a home every step of the way. We make the process easy, from beginning to end.

Why Do Mortage Rates Change?

Mortgage interest rates are directly affected by the current market. If the economy is thriving, interest rates usually increase. However, if the economy is in a slump, rates usually decrease in hopes that low rates will encourage economic growth.

The Federal Reserve keeps inflation under control by handling the federal funds rate. The federal funds rate is the rate that financial institutions can borrow money. The changes in the federal funds rate cause interest rates to rise or fall.

Interest rates tend to increase when there is a high demand for purchasing homes. If the homebuying demand is lower, interest rates usually decrease to attract potential homebuyers.

When Are Interest Rates Locked In?

Your mortgage interest rate locks in after your home loan lender approves your loan application and you accept the purchase contract. Once you have an approved purchase contract with an established closing date, you are committed to the interest rate outlined in the contract. Keep in mind the period of time when the interest rates are low enough for you to afford your mortgage payments, including the closing costs, in your budget.

A rate lock period ranges from 15 to 60 days. Some factors that may affect the ability to lock your mortgage rate or change the rate that was originally offered are:

  • Changes in your financial situation
  • Changes in your credit score
    • Opening a new line of credit while acquiring a mortgage has the possibility of changing your debt-to-income ratio, thus impacting your credit score
  • Changes regarding your application

Learn More About the Mortgage Process

There is a great deal involved in purchasing a new home. In addition to searching for the perfect home, applying for and acquiring a loan from mortgage lenders, and locking in a mortgage rate, new homeowners should also learn more about the difference between MIP and PMI.

Our team at Altitude Home Loans is here for you every step of the way. We can help answer the question, “when are interest rates locked in?” We offer conventional, fixed-rate, and floating mortgages and have mortgage programs for first-time home buyers. We also have a downpayment assistance program!

Call us today and review your options with our team of experts at Altitude Home Loans, the 2021 Reader’s Choice Award Winner in the Arizona Daily Star, at 520-500-1010!