July 18, 2019
Mortgage loan rates have been reported at historic lows in recent times and many are wondering if now is the right time to buy or refinance a home, or if it’s better to wait to see if rates sink even lower.
Should you wait to refinance? Is it better to hold off on buying? There is no good answer to these questions for one reason-all home loan transactions are different, not all get offered the same interest rates, and your experience may vary.
First-time home buyers should know that when you are looking for a new home to purchase with an FHA mortgage, the interest rates you see today may not be the same
The mortgage rate lock means that the mortgage rate you and the lender agree to is locked in and NOT subject to change for the duration of the agreement. Then and ONLY then does a borrower have protection against future changes.
Until you make the rate lock commitment rates will change. And you should know that the mortgage loan rate lock is applicable only to circumstances where you are serious about purchasing a specific property. You won’t be offered a rate lock if you are still house hunting.
When it comes to refinance loans, the same general rules apply-until you commit to the loan, rates are subject to change. You will need to discuss your refinance loan with the lender to see what procedures are needed to protect you against changes in the interest rate.
But there is one major reason to consider committing to a home loan interest rate when rates are low instead of waiting to see if they go even lower.
Rates move to historic lows and then they move up again. Mortgage rates are part cyclical, partly influenced by investor behavior, and partly influenced by other factors including what government agencies like the Fed do in terms of overall interest rate adjustments. In other words, it’s too unpredictable to advise borrowers “You should DEFINITELY wait for rates to move lower”.
If you see an interest rate at current lows that looks good to you, it may be in your best interest to commit to that rate-especially if rates haven’t been that low in some time-will the proverbial rubber band snap back the other way?
It has happened before. It may happen again. So the real question when it comes to the timing of your mortgage rate lock commitment is whether or not you can afford the risk.
If you can’t afford the risk, it’s better to commit. If you aren’t as concerned, waiting is an option. In some cases it really is as simple as that. But the risk should NOT be underestimated.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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