Lock now if closing isn't for 4+ months?

I'm in the process of building a home. I can lock in now at 4% for 165 days, at a cost of around $600. At 135 days, I could get 3.875% (for same cost), but that's cutting things too close for the house completion (mid Feb). Any thoughts on locking before Thursday's Fed meeting? Any insight how much rates might go up in the next few days to 4 months? Thanks

2 Answers

Hey Thomas,

Ordinarily, I wouldn't be too thrilled about locking that far out from closing, but that pricing seems pretty danged competitive. It would be interesting to know what price you could currently get on a 60-90 day lock, just to see if it was significantly better than the extended pricing. I presume the $600 cost is charged upfront, and non-refundable? That's typically the case for locks of that length. Do you have any float down options (meaning if rates improve between lock date and closing your pricing could improve by at least a portion of the gains)?

As far as "how much rates might go up in the next 3 days to 4 months", anyone who told you they knew would be lying. In general, economic growth translates to higher rates, low inflation and/or economic duress helps keep rates down. If I were GUESSING, I'd say the world's economies aren't going to miraculously cure themselves anytime soon, but that is about all I'd be willing to state.

Bottom line, if those were my options, and I was happy with 4% (which is the "best execution rate" for most lenders now on 30 day locks!), think I'd jump on it. You could sure do worse!

What I always ask people is this:

Which situation would upset you more?? If you locked in now and later on rates went down? Or if you didn't lock in and they went up? Let the answer to that question determine your course of action!