The interest rate is dependent on market trends. Locking in a rate protects you during the timeframe from your rate lock to the day that your lock period expires.

What is a Lock-In Agreement?

This agreement between the credit union and the member specifies the number of days your rate and points are guaranteed. If the rate increases during that time, you are still guaranteed the rate that you "locked" in at. If interest rates fall during that period, you will pay the higher rate you locked in at.

When Can I Lock?

Please reach out to the Mortgage team to discuss rate lock options and timing. We currently offer a variety of lock-in periods which may range from 15 to 90 days. This means your loan must close and disburse within this number of days from the day we confirm your lock.

An adjustable-rate mortgage, also referred to as an "ARM," is a loan that provides a lower initial interest rate than most fixed-rate loans. But the interest rate can change periodically, usually in relation to an index, and in line with the type of ARM, for example: a three-year can change every three years, a 5-year would potentially change every five years, etc. When the rate changes, the monthly payment will also change.

To learn more, visit our blog titled: "Adjustable Rate Mortgages - Your Questions Answered"

Each point is equal to one percent of the loan. If you buy points at your closing you will lower your monthly payments but pay more at the closing.

To determine whether buying points is the right choice for you, it helps to compare the cost of the points paid to the savings you receive on your monthly payments. You can do this by dividing the total cost of the points by the savings in each monthly payment. For example, if you pay $2,000 to buy a point and your monthly savings with buying a point is $200, then divide $2,000 by $200. This comes out to 10 months of payments. By the 11^th month, you have already recouped the price you paid for the point. If you plan to stay in your house for any length of time, then buying points might be a good option.

The Federal Truth in Lending law requires that financial institutions disclose the APR when they advertise a rate. The APR reflects the actual cost of obtaining financing plus some closing fees. In addition to the interest rate, these fees determine an estimated cost of financing over the length of the loan. Usually, most people end up refinancing at some point so it may be considered misleading to spread some of these up front costs over the entire loan term.

Unfortunately, the APR doesn't include all the closing fees. Lenders are allowed to decide which fees they include. Fees for things like appraisals, title work, and document preparation are not included even though you'll probably have to pay them.

For adjustable-rate mortgages, the APR can be even more confusing. Since no one can predict market conditions there will most likely be rate adjustments.

It’s best to use the APR as a guideline when shopping for a good rate but seek a loan that works for you. Keep in mind total fees and possible rate adjustments (in the case of an adjustable-rate mortgage). Also, consider the length of time you plan on keeping the mortgage (or figure you’ll refinance later to draw funds out or lower your payment if rates drop), and whether you will be staying in the same place for any length of time.

Keep in mind that the APR is an effective interest rate not the actual interest rate. Your monthly payments will be based on the actual interest rate, the amount you borrow, and the term of your loan.

Mortgage rates are difficult to predict as the stock market changes daily.

If you feel that rates are going to increase, then it's best to lock in at your current rate. Just make sure that you do so during the rate lock period. There is a finite amount of time you have to lock in the rate. In most cases, when purchasing a new home, the loan usually takes 30-45 days to close (could be longer in some states or if there is still negotiating to do). Make sure you know the estimated closing date so that you can choose the rate lock period. Also, if you refinance and have secondary financing on your home that won't be paid off, make sure you allow some extra time to contact the lender to get their permission.

If you think rates might drop while your loan is being processed, you can take a risk and let your rate "float" instead of locking. After you apply, you can lock in the rate.