What happens when mortgage rates change during the homebuying process?

By: Martin Dasko on September 13, 2016

You’re hunting for the perfect home. You’re looking at all of the different options. You’re debating which community to live in and at which price point to buy. You’re taking your time to decide because you know that buying a home is an important decision. You’ve even researched mortgage rates and you know you can get a killer interest rate.

All of a sudden, the mortgage rates change. What happens next?

The importance of mortgage pre-approval

Before you go looking for a home, get a mortgage pre-approval just to see what you can afford and where you stand.

A mortgage pre-approval helps you be realistic when shopping for homes. You don’t want to find out after the fact that you can’t afford your dream home. The lender also benefits when you get pre-approved. The lender gets a great deal of the paperwork out of the way by having you scan and present every important document about your financial history with the mortgage pre-approval. You’re also going to agree on the mortgage terms during the pre-approval process as well.

While a mortgage pre-approval can give you a good idea of where you stand with financing, it’s important to understand that you’re not 100% committed to that lender just because you have a pre-approval. Your lender might not be committed to you (or your rate), either.

This isn’t a bad thing, though. The good news about rates changing when you’re going through the homebuying process. You can go to another lender. You don’t have to stick with the original source of the pre-approval. If you have your documents in order, a decent down-payment, and are financially ready, then you’ll have plenty of choices.

Protection with a fixed-rate mortgage

If you get pre-approved for a fixed-rate mortgage and the rates go up as you’re searching for your next home, you’re usually protected. This is one of the benefits of going through the pre-approval process before you start house hunting. You are more likely to have a rate ready for you when you finally go through with the purchase. On the flip side, it’s up to you to decide if a fixed-rate mortgage is rate for you or if you should go with a variable-rate.

Understand that the guaranteed rate is only available for a limited time. You might only be protected as long as you close on a home within 30, 60, or 90 days, depending on the lender and type of loan you hope to get.

Shop around to find the best rate before you make the offer on the home

The best part of shopping around for anything is that you don’t have to settle. This is true with homebuying. You can shop around until you’re happy with the rate that you find. The onus is on you to explore all possible options because your interest rate will impact how much money you spend on interest.

As long as you lock in your mortgage rate, you might not have to worry about changing rates – and that’s one less thing to weigh on you during the process.

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