In today's market it can be very tough to know when to lock and when to float. In case you're not familiar with the terminology, here's a quick explanation...
Locking simply means that you are in essence "reserving" your interest rate with a lender with a specific loan program selected. Once you lock, you have done just that- you're locked in.
Floating is just like it sounds- you are following the market and will make your decision when you are good and ready. Floating can be beneficial, but also risky. If the market gets worse and you get to the point that you have to lock, then you are subject to whatever rate the market dictates.
The market has been holding steady below 5% lately, so there's no pressure to lock right now. Mortgage bonds lost a little today but are up a smidge on the week so far. Mortgage bonds are the primary indicator of interest rates, so they are always the largest focus when I'm looking at the market. Remember, rising bonds mean falling rates. I'll probably write more about that in another post some time...
In part 2 I'll go into what actually happens when you lock your loan. You'll be shocked! (probably not, but it is pretty interesting)
Tuesday, January 13, 2009
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It is tough, but I always advice my clients to lock if they are happy with the current rate and payment. Waiting often only leads to regrets.
ReplyDeleteI agree, I advise people that if they can afford the payment and if it well represents their needs, that they should lock and don't look back. A bird in the hand is worth two in the bush.
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