VA loan officers who have been around for a few years and more than one refinance cycle can attest to the fact that there are two basic types of borrowers when it comes to locking in a VA interest rate. There are those who are satisfied with the current market rate and elect to lock the quoted VA rate, guaranteeing it until the after the loan has closed and those who want to squeeze out just one more one-eighth of one percent. What type are you?
It’s truly a personality trait. There really is no “best” way but perhaps a more prudent method. Sometimes a borrower can get too fixated on interest rates and forget what rates truly represent—the monthly payment.
Consumers over the years have been told by various advertisements to shop, shop, and shop for the best deal. Insurance companies encourage you to compare their rates with others and certain insurance companies even provide quotes from other companies alongside their own. And mortgage customers have been told to apply at one place then compare the various quotes that soon come their way.
So let’s say rates today are 4.75 percent and your VA loan officer has told you that you can lock in your loan. Should you? Your loan amount of $200,000 on a 30 year fixed loan at 4.75 gives you a $1,043 principal and interest payment. That’s the best rate available so you decide to give the go-ahead and lock it in. A few days later, you close your loan.
Or, you think you can get 4.625 percent so you wait. The difference is $1,028 per month compared to the 4.75 rate for a savings of $15. You wait for the rate to fall. But it doesn’t. For the next several days, it goes up a bit, then back down. Then up, then down. But it never gets to 4.625 for two more weeks. And what have you done? You’ve risked the best rate available of 4.75 percent and lost your fair share of sleep. The choice is all yours.