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Innately, lock-rate options are a bit of a gamble. Rates potentially could go down further once a rate is locked, Maguire-Feltch acknowledged, but the option yields some measure of control and flexibility as they embark on a home purchase. “There isn’t an exact science to timing the market, and while interest rates have skyrocketed in recent months, it’s always possible that interest rates could fall,” she said. “Some lenders offer a mortgage rate lock float down, which allows you to lock in an interest rate with the option to reduce if market rates fall during the lock period. This option provides you with a little more security in a volatile market and allows you to take advantage of falling interest rates.”
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Depending on the situation, she added, there could be greater flexibility: “You may be able to move to a lower rate even without the float down option but reducing your rate without that option may require additional fees. Additionally, your lender may have particular requirements, such as being at a certain stage of the loan process, for the customer to be eligible to lower their rate.”
Despite the rate-lock appeal, Maguire-Feltch encourage consumers – especially first-time homebuyers embarking on a purchase in this economic climate – to empower themselves with research either way: “Buyers planning to buy a home in 2022, particularly first-time buyers, should start by educating themselves on the homebuying process,” she said. “There are many avenues for this, including a homebuying course, online articles, etc. One resource prospective buyers can consider is the Beginner to Buyer podcast from Chase. The podcast was developed to create a better understanding of and confidence in the homebuying process, from mortgage application to move in.”
Still, hedging one’s bets amid the roller-coaster cycle of mortgage rates is something to consider, she suggested: “As rates rise, consumers may face additional affordability and qualification challenges as they continue to compete with cash buyers in a housing market with high demand and historically low inventory,” she said. “We encourage consumers to work with their lender to understand what they can qualify for and to help support them in the home buying process.”
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