Q:
Where are interest rates headed?
A: No one knows for sure where rates
are headed.Beyond public policies put in place by the Federal Reserve
Board, there are no laws that govern mortgage rates. Historically,
usury laws were used to prevent lenders from charging sky-high interest
rates when lending money. But in some states where there are usury
laws, banks, thrifts and a number of other financial institutions
are exempt from the law.
Today, interest rates are governed solely by the financial markets
and by Federal Reserve Board action, neither of which can be predicted
with absolute certainty.
Q: How do you lock
in an interest rate?
A: Locking in a mortgage rate with
a lender is one way to ensure that same rate still will be available
when you need it.
Lock-ins make sense when borrowers expect rates to rise during the
next 30 to 60 days, which is the usual length of time lock-ins are
available.
A lock-in given at the time of application
is useful because it may take the lender several weeks or longer
to prepare a loan application (though automated loan practices
are cutting this time dramatically).
However, some lenders require borrowers
to pay lock-in fees to assure particular rates and terms. Be sure
to check that the rates and points are guaranteed and that your
lock-in period is long enough. If your lock-in expires, most lenders
will offer the loan based on the prevailing interest rate and
points.
Lenders may have preprinted forms that
set out the exact terms of the lock-in agreement. Others may only
make an oral lock-in promise on the telephone or at the time of
application.
Resources:
* "A Consumer's Guide to Mortgage Lock-Ins," published
by the Federal Reserve Board and Office of Thrift Supervision,
Washington, D.C.
