Locking a loan is the trickiest job to do since there is an uncertainty factor that revolves around locking a loan. In certain cases, locking a loan might yield better results for the borrower but in others it might lead to a disaster. Financial experts advise borrowers to lock a loan since that is considered to be the best option. There are a lot of factors that have to be considered before locking loans. Locking a loan simply means that the person would lock the interest rate charged on the loan.

Risk

As mentioned earlier, locking a loan is a risky one. Market would never be stable and thus fluctuations are meant to happen anytime. Locking a loan should also be done as quickly as possible. One would take much time in selecting a loan program that they are ready to lock on. Analyzing a loan is what would take most of the time and by the time, one decides on the loan to choose, the market state would have altered and thus at this point of time, locking a loan might not yield the expected result.

Locking a loan is also risky for the lender here. Suppose, if the market situation is such that there is need for the lender to increase the costs associated with the loan, then under such a scenario, lender would be able to increase only to a certain extent and this can lead the lender into a risk. On the other hand, this would also make the person who has locked the loan pay more than he or she eventually planned for. They would not be left with any other choice other than paying the costs.

Locking a loan

As far as locking a loan is concerned, the person is supposed to consider three main factors and that is interest rate, length of the locking period, and points. These are the factors based on which, a loan would be locked. One should also know the fact that locking a loan is not for free and lenders would charge certain fee for that. If the person decides to extend the locking period, then the person would be subjected to pay additional fee. It might also have an impact on the points.

Locking a loan would provide a sigh of relief to the borrower. Financial and real estate experts advise people to lock their loan. One should also know that locking a loan does not mean that the borrower should obtain only that particular loan. He or she can also go for another loan option that offers a much better package than the one provided by the lender, whose loan has been locked.

The above mentioned market scenario might also help the borrower to negotiate the terms of the loan with the lender with whom they have locked the loan by demanding that they would be able to obtain a better program that is available in the market. Length of the locking period would impact the points in such a way that, 30 day locking period would cost the person half a point whereas, 60 day locking period would cost one full point.