When to Lock the Rate on a 30 Year Fixed Mortgage

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills

When to Lock the Rate on a 30 Year Fixed Mortgage

Postby Snow Boarder » Tue Jan 29, 2013 9:46 pm

I am in the process of buying a new home My question revolves around locking in an interest rate for a 30 year fixed morgage.

As a true bogle head I don't do any market timing at all with my MF investments however day to day interest rates are volitile and locking in an interest rate seems to be a market timing type of game - one I am not used to playing. I read articles that say QE3 is coming to an end and others that say rates will stay low till Late 2013 etc etc etc. While waiting for the 2-day fed meeting (today & tomorrow) interest rates have inched up

What impact is the January 29th & 30th 2013 fed meeting likely to have on 30 year fixed interest rates? Should I, in boglehead style, say I can't control the market and just lock it in at tomorrow's opening value?

All opinions welcomed...
Greenville (SC) Chapter Coordinator | greenvillebogleheads@gmail.com
Snow Boarder
 
Posts: 185
Joined: Mon Mar 26, 2012 9:55 am

Re: When to Lock the Rate on a 30 Year Fixed Mortgage

Postby Rainier » Tue Jan 29, 2013 9:52 pm

Lock and get a float down option.

Just tell the lender you want the option to float down the rate one time before closing, otherwise you will walk and find a new lender at the 11th hour if the rate drops.
- Bill
User avatar
Rainier
 
Posts: 875
Joined: Thu Jun 14, 2012 5:59 am

Re: When to Lock the Rate on a 30 Year Fixed Mortgage

Postby archbish99 » Tue Jan 29, 2013 9:56 pm

This is similar to the question of when to buy an index fund. If the markets are efficient, then the price today is the right price for today. If you want to time a little bit, check where it has been lately, pick a number on the low end of that, and wait for that number to come around again. Volatility means it's likely to come back, but you take the risk of having the market move away from you.
I'm not a financial advisor, I just play one on the Internet.
User avatar
archbish99
 
Posts: 1325
Joined: Fri Jun 10, 2011 6:02 pm

Re: When to Lock the Rate on a 30 Year Fixed Mortgage

Postby Snow Boarder » Tue Jan 29, 2013 10:09 pm

archbish99 wrote: If you want to time a little bit, check where it has been lately, pick a number on the low end of that, and wait for that number to come around again. Volatility means it's likely to come back, but you take the risk of having the market move away from you.


I do not lose a wink of sleep over my AA or investment risk tolerance etc... but I have not gotten a good night sleep this week.
I have been watching the day to day gyrations for 2-3 days now. http://www.mortgagenewsdaily.com/mortga ... daily.aspx
It is funny but at the same time it isn't funny.
Greenville (SC) Chapter Coordinator | greenvillebogleheads@gmail.com
Snow Boarder
 
Posts: 185
Joined: Mon Mar 26, 2012 9:55 am

Re: When to Lock the Rate on a 30 Year Fixed Mortgage

Postby rr2 » Tue Jan 29, 2013 10:40 pm

Snow Boarder wrote:
archbish99 wrote: If you want to time a little bit, check where it has been lately, pick a number on the low end of that, and wait for that number to come around again. Volatility means it's likely to come back, but you take the risk of having the market move away from you.


I do not lose a wink of sleep over my AA or investment risk tolerance etc... but I have not gotten a good night sleep this week.
I have been watching the day to day gyrations for 2-3 days now. http://www.mortgagenewsdaily.com/mortga ... daily.aspx
It is funny but at the same time it isn't funny.

I recall being in a similar situation when I bought my first home. The problem is that you are constrained by the closing date. If you wait too long then, you may not be able to close on time.

However, you will have opportunities to refinance. It is likely that rates are not going higher anytime soon. So keep all the paperwork handy and get a no closing cost loan now. That way you can refi when the opportunity presents itself.
rr2
 
Posts: 978
Joined: Wed Nov 19, 2008 10:04 pm

Re: When to Lock the Rate on a 30 Year Fixed Mortgage

Postby ddunca1944 » Wed Jan 30, 2013 10:15 am

I've experienced the same angst every time we've purchased a home. But, in the long run, a fraction of a percent really is not that big of a deal. Rates are at historic lows. I'd lock it and be done with it.
ddunca1944
 
Posts: 812
Joined: Fri Apr 01, 2011 1:49 pm

Re: When to Lock the Rate on a 30 Year Fixed Mortgage

Postby nomadgecko » Wed Jan 30, 2013 10:46 am

We're in the midst of refinancing, so I had to make the lock/float decision about 3 weeks ago.

1) Assuming you have run the numbers and are comfortable with the costs and current rates, I would lock.
2) If floating the rate is keeping you up at night, I would say the risk you're taking is too high. You should lock.
3) Will you get the best rate during this period of history, odds are no. But if getting a house is important to you, and you have terms you can live with; lock and load.

Then once you're in the house and the dust has settled, you can refinance down the road if there is a significant improvement over where things are today. Also at that point, maybe you will want to pay down principal and move into a shorter term mortgage (which is a much bigger lever than +/- 0.125% on a 30 yr).
nomadgecko
 
Posts: 58
Joined: Sun Mar 11, 2007 11:32 pm

Re: When to Lock the Rate on a 30 Year Fixed Mortgage

Postby Snow Boarder » Wed Jan 30, 2013 11:38 am

nomadgecko wrote:We're in the midst of refinancing, so I had to make the lock/float decision about 3 weeks ago.

1) Assuming you have run the numbers and are comfortable with the costs and current rates, I would lock.
2) If floating the rate is keeping you up at night, I would say the risk you're taking is too high. You should lock.
3) Will you get the best rate during this period of history, odds are no. But if getting a house is important to you, and you have terms you can live with; lock and load.

Then once you're in the house and the dust has settled, you can refinance down the road if there is a significant improvement over where things are today. Also at that point, maybe you will want to pay down principal and move into a shorter term mortgage (which is a much bigger lever than +/- 0.125% on a 30 yr).


Thanks for all the replies. After reading them I decided locking today was the best thing for me. 30 yrs @ 4.0% with APR of 4.125 is the current option.
No points and lower closing costs are reflected in the rate.

I think some of the anxiety comes from the unexpected move (sudden need for a 1 story ranch) and leaving a 20yr fixed apr of 3.8.

One last thing. Will it make any difference good or bad, to wait til after the fed meeting this afternoon? (Timing it again. I know :oops: )
Greenville (SC) Chapter Coordinator | greenvillebogleheads@gmail.com
Snow Boarder
 
Posts: 185
Joined: Mon Mar 26, 2012 9:55 am

Re: When to Lock the Rate on a 30 Year Fixed Mortgage

Postby Nowizard » Wed Jan 30, 2013 2:37 pm

Rates are dependent on your credit history, FICO score, income, amount of down payment, etc., as you know. If you qualify for the lowest rate on all accounts, the rate you mentioned is higher than seems appropriate. We have recently locked in a 3.5% rate on a 30 year loan with Iberia Bank. Not to confuse the issue, but you might call around and determine if you have the best rate since you know what tier you are being considered for by the lender.
Tim
Nowizard
 
Posts: 490
Joined: Tue Oct 23, 2007 5:33 pm

Re: When to Lock the Rate on a 30 Year Fixed Mortgage

Postby hand » Wed Jan 30, 2013 3:15 pm

Nowizard wrote:Rates are dependent on your credit history, FICO score, income, amount of down payment, etc., as you know. If you qualify for the lowest rate on all accounts, the rate you mentioned is higher than seems appropriate. We have recently locked in a 3.5% rate on a 30 year loan with Iberia Bank. Not to confuse the issue, but you might call around and determine if you have the best rate since you know what tier you are being considered for by the lender.
Tim


+1 - Are you certain you are being offered a competitive rate? I know when I purchased a house the "recommended" lender (which also happened to be partially owned by the realtor to get around anti-kickback legislation) offered rates that were significantly higher than what I found through a mortgage broker. I'd suggest you check out one of the online lenders to get an idea of market rates. In my area, 30 year fixed rates are in the 3.5% - 3.625% range for highly qualified borrowers.

I would also echo the above poster who suggested locking when the financials of your deal work - you have enough going on trying to negotiate a house purchase, why take on risk and stress you don't have to. If you absolutely have to dig further, check out http://www.mortgagenewsdaily.com/ for some commentary / guesses on current and future rates and locking strategy.
User avatar
hand
 
Posts: 609
Joined: Sun May 17, 2009 8:42 pm


Return to Personal Finance (Not Investing)

Who is online

Users browsing this forum: ahmadcpa, anakinskywalker, cusetownusa, dbCooperAir, fposte, Google [Bot], just frank, markcoop, my2p, Rob5TCP, takeshi, Two Headed Mule, Will do good, zip605 and 84 guests