Locking In the Best Mortgage Rates

Mortgage rates just jumped another quarter point! I wanted to wait until I got a bonus from work for my down payment before locking my mortgage rate, but now I worry I'll miss out on the best mortgage. What should I do?

A: Remember that the lowest mortgage rates always require you to pay down some points or to lay out a significant down payment. It sounds like you've already got a plan to increase the amount of cash you're bringing to closing, and that's great. Now, it's time for you to decide whether you're ready to lock a mortgage rate.

"Locking" a mortgage rate doesn't guarantee that you'll get the mortgage. However, it does represent a good faith intent between buyer and lender to do business. The mortgage lenders typically lock for 15, 30, or 60+ days (although there may be a charge for longer locks or a discount for shorter locks). This is usually enough time to complete due diligence, prepare paperwork, or even save more down payment cash.

Keep in mind that some mortgage lenders will lock rates with "float-downs." That means they're willing to guarantee that if rates drop when you're ready to close, you get the lower rate. If rates increase, you're protected and get the rate you locked initially. Be prepared to pay for that option, but it could be worth it--especially if an increase in rates could prevent you from qualifying for your loan.