As mortgage rates rise, they reduce home buying budgets. Just a 1% rise in rate can mean a $40,000 drop in purchase power (in some cases) on a $400,000 purchase price. While rates aren’t expected to jump by 1% overnight, they are rising, and any loss in purchasing power is hard to swallow. If you know you’ll be buying in the next few months, get pre-approved and receive a “lock” or guarantee that freezes your interest rate at today’s rates for a limited time (2 to 4 months, typically). By the time you find a place you like, rates may have risen, and competing bidders who didn’t get a pre-approved commitment might have to scale back their price point from what they initially estimated. A rate lock will cost you some money up-front, but save you a lot more in the long run. Ask your lender for information.
