As a potential home buyer, you will by now know the concept of a lock in period, where the rate and points of a loan are locked in for a certain period. If a lender gives you a 30 day lock in period, this means that whatever rate and number of points he quotes you will be good for the next 30 days, regardless of changes in the interest rate market.

Of course, if the loan does not close within the 30 day period, the agreement expires, and the lender is no longer obligated to lend at that rate and point combination. Sometimes this is not a problem since the loan rates have not risen in the interim and may even have fallen.

Most borrowers are offered a 30 day lock in period, but this is not practical in some situations to locate, contract on, inspect and close a house in 30 days. A lot of buyers will decide to add 15 days, but banks usually charge additionally for taking on the added risk of rates increasing ? taux hypothecaire quebec.

The first thing most borrowers have to consider whether or not they need a lock in rate. Do you think interest rates will go up? Or are you of the opinion that a faltering economy will mean rates are going no where but down?

Many times, borrowers don't want to even think about whether rates will go up or down, they just want to stick to the rate that works for their budget and they will lock in the rate.

A lock in rate creates a bit of a Catch-22, since buyers are advised that the most advantageous bargaining position to be in is to have a pre-approved loan. This means you have to negotiate your mortgage and have a locked in rate in advance when you start looking for a home. This is a tight time frame, attempting to find the house, negotiate the price and close in such a limited period.

If you have a good notion of the location and type of home you want, it can be done quickly. The good news is that most sellers are not in a good negotiating position in the current housing market, so that stage of the process should go quickly and smoothly. Choose a home inspector ahead of time so you can expedite this process as well.

Another reason one should choose to use a lock in rate is if you barely qualify for a loan. If you are in such a situation, minor changes in your own finances or the economy may eliminate your chance at a mortgage.

The bottom line is you should decide to use a lock in rate if you: 1) think rates will increase 2) don't want to take risks on the rate or 3) or border line qualifying and prefer not to lose the rate.