Rates are not one size fits all. Rates are dependent on many factors (credit score, loan type, loan amount, down payment amount….) Rates change with the market and can at times move up or down multiple times in the same day. When shopping rates, always make sure you are comparing the same parameters with each lender to ensure you are getting an accurate comparison. These comparisons should be done on the same day.
What does locking in a rate mean?
Locking in a rate basically means you are selecting your rate. You select your rate for a certain time period upfront so that you are no longer subject to market conditions. These conditions include shopping for a house, going through the loan process, or while your new home is being built. The lock can be before 30, 45,60, 90 days, etc…This time is important as you need to close the loan during that lock period, or else you are subject to extension fees to maintain the same lock. Locking your loan rate is an important step in the process and your loan officer will guide you through that.
What’s the difference between an Adjustable Rate Mortgage and a Fixed Rate?
A fixed-rate mortgage has a rate that stays the same through the entirety of the loan term. An adjustable-rate mortgage is one that may be locked in for an initial period of time i.e. the first 5, 7, or 10 years of the loan term. After that time the rate can adjust based on the market conditions at that time. Typically adjustable rate mortgages will come with lower rates than fixed-rate mortgages during that initial fixed period.
What are points?
With mortgages, there are two types of points you can come across and be asked to pay. The first is Origination Points. This is simply a fee that goes directly to the lender as revenue for doing the loan. The other type of points paid on mortgages are called discount points. Discount points are simply money paid upfront for a lower interest rate. Because they are used to lower your interest rate-discount points are not revenue to the lender.