FHA Loan Interest Rates: When Is it Right to Lock Them In?
How does a mortgage rate lock work for an FHA mortgage? Basically, you and the lender agree to a fixed time period where the rate offered to you is locked and will not change.
Some borrowers are excited to learn this, hoping they can lock in a rate as early as possible so they don’t have to worry about changes later on down the line. But is this realistic? Consider the advice from the Consumer Financial Protection Bureau (CFPB), which notes:
“If your interest rate is locked, your rate won't change between when you get the rate lock and closing, as long as you close within the specified time frame and there are no changes to your application.”
CFPB adds that mortgage rate locks are typically available for 30, 45, or 60 days” and sometimes longer.
Interest Rate Locks
It’s easy to see from the above that you can’t get an indefinite lock. That fact eliminates the possibility of getting a rate lock the moment you find a suitable home, usually with good reason. Much depends on how close you are to closing day, whether there are any changes to your application, etc.
If you aren’t used to the home-buying process, this may feel a bit intimidating at first, but it’s a simple matter to get the lock once you’ve discussed terms and conditions with the lender.
What to Know About FHA Home Loan Interest Rates and Rate Locks
- The FHA does not set or regulate interest rates.
- The FHA requires rates on its loans to be customary compared to similar non-FHA mortgages.
- Interest rate locks expire. If you don’t reach the closing day before your lock commitment expires you will have to renegotiate the lock with your lender.
- If your application changes, you may need to negotiate a new rate lock.
- The interest rate lock agreement protects the borrower from fluctuations in the rate once the commitment has been made to lock the rate. But it also works in reverse. If rates go lower, you would have to ask the lender to re-negotiate if you want to take advantage of the lower interest rate.
According to the FHA Handbook, “The Mortgagee may charge the Borrower lock-in and rate lock fees only if the Mortgagee provides a lock-in or commitment agreement guaranteeing the interest rate and/or discount points for a period of not less than 15 Days prior to the anticipated closing.”
Ask an FHA lender to explain any rate lock fees or service charges that may apply.
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