If you are shopping for a mortgage loan, you should shop from a variety of mortgage lenders for the best interest rate, terms, lender fees, and closing costs. When you find the perfect mortgage it is important to have the interest rate guaranteed by the lender and have the guarantee locked in. Here is what you need to know about rate locks so you will not miss out the loan you have selected.

What are Rate Lock Guarantees?

Rate lock guarantees are a commitment by the mortgage lender to hold a negotiated interest rate and points for you. Rate locks are only guaranteed for a certain period of time; it is important to ensure that the lender guarantees your interest rate long enough to allow you to close on the loan. Interest rate locks vary from one lender to the next; some lenders will allow you to lock in the interest rate upon receipt of your application, others will not guarantee the interest rate until after you are approved for the mortgage loan. It is important to secure this rate lock guarantee as quickly as possible as mortgage interest rates can change on a daily basis.

There are advantages and disadvantages to interest rate locks. Mortgage interest rate locks protect you from unfavorable rate increases while the mortgage lender processes your application. The bad thing about a rate lock is that it will prevent you from receiving a lower rate should interest rates drop while the lender is processing your application.

Make sure that the mortgage lender guarantees your interest rate in writing, and that the guarantee covers not just the interest rate but the points you will pay and what you get for paying points. It is a good idea to read the conditions of the lenders interest rate lock before applying for a loan. If you have a real estate attorney that can review the lenders guarantee you can protect yourself from lenders that bait and switch interest rates in the fine print.

Are There Fees For Interest Rate Guarantees?

Many mortgage lenders charge a fee to guarantee your interest rate. There is no standard fee for a mortgage interest rate guarantee from one lender to the next; however, this fee may not be refundable if you decide not to borrow from that mortgage lender. Interest rate locks are typically guaranteed for a period time ranging from 30 days to as long as 120 days. When it comes to rate lock guarantees the longer you can have the lender guarantee your rate the better; you need this time to provide all necessary documentation and close on the mortgage. If the interest rate lock expires before you are able to close on the mortgage, the lender will most likely raise the interest rate and this could further delay your closing. To learn more about shopping for a mortgage and avoiding common homeowner mistakes, register for a free mortgage guidebook using the links below.

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Louie Latour specializes in showing homeowners how to avoid common mortgage mistakes and predatory lenders. For a free copy of "Mortgage Refinancing: What You Need to Know," which teaches strategies to find the best mortgage and save thousands of dollars in the process, visit Refiadvisor.com.

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