Getting the best mortgage rate when rates start to drop

Spring has arrived and with it comes a significant drop in mortgage interest rates.

Over the last few months, when I’ve chatted with clients who are renewing or planning to buy in the spring market, I have said in almost every conversation that by mid-March rate wars tend to start.

Regardless of what is happening in the interest rate environment as a whole, it seems by the third week of March lenders start sharpening their pencils.

Over the last two weeks, I started to see lender bulletins trickle in advertising quick-close rate specials (ie: for mortgages finalizing within 60 days) and rate drops across the board. One day last week, I had updates from six different lenders — before noon.

Why is that important to you? Not all lenders have the same policies with respect to dropping their rates once your mortgage has been approved. When you go into a holding pattern after your mortgage has been approved but before it has finalized, rates can change. If they go up, you are covered by the rate you have in place.

If they go down, how does your lender deal with your file? Some lenders won’t drop your rate. Some lenders will drop it once. Some maybe twice. There are a few lenders that will drop your rate an unlimited number of times up to a few days before your mortgage finalizes.

When I am choosing a lender for my clients, that is absolutely one of the most important things I consider. All things being equal, if I can place a mortgage with a lender that offers unlimited rate float downs I will.

I watch my calendar of upcoming closings and proactively reach out to those lenders to request better rates for my clients. It’s a win to be able to get the benefit of falling interest rates without having to change lenders.

If you are buying a home, renewing your mortgage or looking to refinance this is a key question you should ask your mortgage person. Find out whether they will adjust the rate on your mortgage and what the process is (do you have to request it?).

At the same time, find out how many times they are able to reduce the rate for you.

Regardless of the answer, I suggest touching base with your mortgage person or lender periodically up to the time your finalize your mortgage to confirm you are receiving the lowest rate they have available for you.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.