One of the factors that come into play when searching for VA lenders are the interest rates they’ll offer. That’s why when you find a lender that provides you the most favorable interest rate, you’ll want to ensure that it matches the rate when the loan closes.
By locking in your VA mortgage rate, you can rest assured that your rate will not change through the loan process. If you don’t, you could potentially get a higher interest rate as market changes occur, which could cost you thousands of dollars over the life of the loan.
The Veteran’s Affairs backs VA loans if you are unable to pay back the mortgage loan. With this security, lenders will offer more favorable terms. When you’ve found the lender that you want to work with, you need to take some steps to lock in the VA mortgage rate.
Locking a VA Loan Rate
During market volatility, interest rates can change rapidly, even rising and falling on the same day. Having peace of mind by locking in the interest rate will allow you to concentrate on other parts of the home buying process. Your lender will not lock in the interest rate until you provide them with written permission. There might be some variable policies on how to secure your rate, but there are some common traits among most lenders.
To lock in your interest rate, you need to have the loan application on file with the lender and the house you want to purchase in mind. There is no reason to lock in on an interest rate until after signing a purchase agreement for a property.
You are responsible for keeping track of interest rates at this point and determining when to lock in your rate. The loan officer might contact you with updates, but it is best to keep a finger on the pulse of the market yourself. Interest rates can be found online, as most lenders post daily updates on their websites about the current interest rate on different mortgage loans they offer.
Some lenders may have a fee for locking in an interest rate. This cost will vary by lender, as well as how long the lock lasts. Typically, it is less expensive for shorter amounts of time. The lock periods can range from five days to sixty days, which is also the time frame that most lenders use to let you know whether you’ve been approved.
Important Factors in a VA Mortgage Lock
A 12-digit number is used to identify a borrower, property location, and nearest VA office to the property on VA mortgage loans. Lenders who work with VA mortgage loans are required to capture this VA identification number for every loan. Keep this VA loan number on hand if you need to talk to your lender about the mortgage lock or any other questions you may have.
During the pre-approval process, lenders quote the interest rate for your VA mortgage loan. That rate isn’t set in stone until a purchase agreement has been signed. During this time, you have a floating interest rate, which fluctuates during the time leading up to the closing.
Be aware of the fee for locking your interest rate. If you lock the rate for as long as 60 days, it could mean as much as a half a percentage point of the loan amount. On a $250,000 loan, a 60-day loan could mean a fee of $1250. This might seem like a huge fee, but in the end, it could save you thousands if you don’t lock the interest rate and the interest rate rises. You could be stuck with an interest rate that will cost you thousands of dollars over the life of the loan.
Some lenders may allow you one “float down” if interest rates drop since you have locked in your rate. This drop-in interest rate generally has to be substantial for the lender to allow you to float down. Here's a calculator to help determine what your VA loan payments will be based on the purchased price, down payment, interest rate, military experience, and prior VA loan use.
NASB is a top VA lender who can help you with your VA loan. Call us today at 855-465-0753 for more information.
