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Locking your VA Loan Rate

By: Grant Moon 04/22/13 12:40 pm

Locking your VA loan Rate

When it comes to selecting and locking in an interest rate for a VA home loan, there are two types of borrowers; those who follow the interest rate markets and those who don’t. While everyone who shops for a VA home loan is interested in getting the best deal, ultimately it’s the VA borrower who decides when to lock an interest rate and when to let it “float.”

Regardless of any initial rate quote, a VA lender won’t lock in your VA rate without your precise permission. Why? Say that a VA lender quoted you a rate of 3.75 percent and you immediately sent them a VA loan application and the lender locked in your 3.75 quote. Without your permission. After a couple of weeks, interest rates dropped to 3.50 percent but you can’t get the lower rate because your loan is locked.

A loan officer will be happy to discuss interest rate trends but the loan officer won’t lock in your mortgage unless you tell him to. Some VA borrowers who are comfortable with the rate they’re being quoted and decide to lock in the mortgage rate and move on.

Other borrowers follow the markets daily and peruse economic reports giving them a hint of what interest rates might do the following. Such borrowers want to squeeze out another 1/8 percent in rate if they can and spend an inordinate amount of time trying to predict interest rate moves.

Sometimes this leads to “paralysis by analysis” where the borrower doesn’t do anything and allows the interest rate to float simply because there’s so much data to analyze. But the fact is that no one knows what interest rates do and certainly no one can predict that rates will be lower by one-half percent next week. But some think they can if they only digest enough news and listen to the pundits on T.V.

Which type are you? Are you the type that realizes that today’s rates are as good as they’ve ever been and it’s time to lock? Or are you the borrower that waits, worries and wonders what rates will be next week, afraid that rates might be lower next week.

What’s that phrase, “A bird in the hand is worth two in the bush?”

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