If you didn't receive a fixed interest rate, your interest rate could change any time between accepting the mortgage and the closing date. Yes, the mortgage rate may change after obtaining prior approval. And if rates are volatile at that time, they could change quite a bit. Once your mortgage pre-approval is approved, your interest rate will normally remain fixed for 90 to 120 days.
If interest rates rise during that time, you will continue to receive the promised rate. However, if rates go down, you can see if you can get a better mortgage rate when you're ready to close. If you're going to apply for a giant loan, a renewal loan, or an unqualified mortgage, ask your lender when you can set your mortgage rate. If you're stuck with higher mortgage rates and find a home you want to buy, you should call your lender to see if that property is still within your budget.
A mortgage rate lock is a commitment by a lender to guarantee a mortgage rate for a specified period of time. However, when mortgage rates drop rapidly, you'll want to postpone the lockdown until the last possible moment. If you're in the housing search phase, be sure to get pre-approved right away to get a clear idea of your budget and mortgage rate. For example, you could set your rate with two different mortgage brokers doing business with the same lender and receive a phone call informing them that you will have to pay one or the other.
So, the question that many buyers are asking is what exactly pre-approval for a mortgage is. In short, it's when the lender gives you (the buyer) a letter stating that your mortgage will be granted up to a specific dollar amount. If you're buying a home, lenders usually can't set the interest rate on your loan until you've accepted a purchase contract. Once approved, your lender will commit a mortgage to you at a fixed interest rate for a fixed period of time.
Without a rate lock, your interest rate could increase during the mortgage process, making you pay more. An important detail to remember when it comes to pre-approvals is that some lenders can only maintain fixed rates during the pre-approval period. If your lender discovers any changes to your initial application before closing, your interest rate could change. Understanding the how, when and why of mortgage rate lockouts will provide you with the security of having a rate that won't fluctuate, which is especially important since mortgage rates change daily.
While the credit score needed to buy a home can be as low as 500 for an FHA loan, lenders generally offer the best rates for borrowers with scores above 740.