By mark-slade July 28, 2011

Should You Be LOCKING Your Loans?
Posted by KCM: 28 Jul 2011 04:00 AM PDT

Should you lock in the interest rate on your mortgage? A couple of things to consider:
1. While I am confident that the Debt Ceiling Debate will be settled (whether it’s for six months or a year), my greater concern is the growing belief that the ratings agencies are looking at downgrading our government’s bonds from our AAA status. By lowering the credit rating of the bonds being presented to the market, the confidence of those who buy our bonds will be shaken. In order to overcome the risk of lower rated bonds, we will need to offer greater rates of returns on our bonds. THAT will result in a rise in mortgage rates because mortgages are what make up the bonds. This will affect virtually every conforming loan limit home buyer, whether they have conventional or government (FHA/VA) financing.
2. The pending lowering of the maximum loan amounts (slated for October 1st) that can be sold to FannieMae, FreddieMac and GinnieMae (in high cost areas from $729,250 to $625,500 for single family homes) will create more “Jumbo Loans”. Jumbo loans have historically been .25% to .375% higher than conforming loans; however, industry insiders are hinting at a much bigger spread (.75% or more). Granted, this will not impact most home buyers, but it is worth noting.
Now, it is possible that neither item becomes effective. Let’s keep our fingers crossed. Yet, what is the benefit of NOT locking. Maybe rates could go down an eighth or a quarter of a percent. Is that worth the risk of a rate increase that would be quick and dramatick of a half of a percent or more?
The safe bet is to LOCK to protect yourself……my mother always said, “better safe than sorry”.

Mark Slade
Keller Williams