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To Lock, or Not to Lock...That is the Question?

The answer to this question is very important and really only can be made by you. The problem is that deciding when to "lock" your interest rate for your loan can be a very confusing decision. As a mortgage professional, I understand that you want to catch the rate at its lowest point during the time your loan is in process. However, that is "easier said than done". Even professional economists are not able to predict the market with accuracy.

Wall Street has replaced the traditional bank and now pulls the purse strings of this vast mortgage market via "Mortgage Backed Securities". MBS's are traded in the free and open market everyday just like stocks and bonds. The movement of interest rates in the mortgage market is directly related to the buying and selling of the Mortgage Backed Securities on Wall Street.

An important fact to remember about your decision "to lock or not to lock" is that both your commitment and ours are made on the "good faith" of the participants involved. We feel that a promise made is a promise kept, regardless of which way the market moves after the transaction is made.

Of course, all of us as consumers would like to be guaranteed the very best rate in an escalating market and also have a low rate offered in a declining market. Unfortunately, the market cannot provide this assurance in the normal course of business.

If you choose to "float" your rate, you are at the mercy of the market and your interest rate could improve from the time your application was taken or rise as market conditions deteriorate. If you choose to "lock", we will keep our side of the agreement and deliver the agreed upon rate so you will not have to second guess your decision. Either way, talk with your mortgage consultant to fully understand the impact of your decision.

Posted by Jim Hogan - Atlanta Loan Source on 08/02/2007 01:46 PM

Comments (6)

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6 Comments on To Lock, or Not to Lock...That is the Question?

Currrently, I'd recommend a lock. But typically I use this approach...if my customer is happy with the rate and I'm happy with the pricing, LOCK!

08/02/2007 01:55 PM

by Tony D. Howell (Olympic Mortgage Consultants, Inc.)

Jim: This is the way we need to educate consumers about the purchasing process. Clearly, concisely, and often Thanks, for a well presented post.

Fran

08/02/2007 01:56 PM

by Fran 'The Title Man' Gaspari Title Insurance-PA & NJ (Patriot Land Transfer, Inc.)

Great explanation Jim! It's such a big decision that most people are blown through, they don't have much time to consider their options. Your explanation makes it much more clear.

08/02/2007 06:27 PM

by Your Tampa Bay Mortgage Source

I do like the write up however, I feel it is our job to inform the clients about the market, the economic reports that will be released in the next couple of days that will influence rates, and above all, our opinion on where we see rates and whether we feel locking now or later will be most beneficial. Overall, it is the clients' decision if they want to "gamble" a little but after a thorough explanation of everything I have never had a client go against my advice. I do agree with Tony at this time, my advice to all of my referral partners has been to lock everything conforming and non-conforming. Thanks for the insight Jim.

08/08/2007 07:30 PM

by Christopher Toth, cmps (First Security Lending)

I'm not sure you're familiar with it . . . but I recently subscribed to Mortgage Market Guide and I just love it. It's one thing to give the options to lock or float, but giving the reasons behind recommending either at any point in time is invaluable. I've already saved my clients money with all I'm learning with my membership. And that translates into $$ kept in my pocket. I can get you set up with tons of bonuses you'd otherwise miss out on by just going to the website and signing up. If you're interested, check out the website and let me know.

08/09/2007 08:19 PM

by Ilyce N. Powell, CMPS™ - Certified Mortgage Planning Specialist (Envision Lending Group)

Leah -- Thanks for stopping by my blog. Your continued support and guidence as I learn to make "Rain" is appreciated.

Christopher -- You are so right about locking everything when you get it. Considering that many products are being pulled with no notice, as professionals, the risk is too great. I do believe that the customer must make the decision based information that they get from various sources. I try to bring the technical information down to conversational economics for my customer, unless they happen to be an Economics Professor at Emory University.

Ilyce -- Yes, I enjoy the Mortgage Market Guide and have helped many customers understand the risks of floating or locking. I have learned much from the MMG. Thanks for stopping by my blog and hope to see you again.

08/10/2007 10:27 AM

by Jim Hogan - Atlanta Loan Source (Your Atlanta Loan Source)

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