Mortgage rates have been on the rise. After bottoming in early 2022, rates more than doubled just a few months later. In October 2022, rates reached more than 7% on 30-year fixed rate mortgages. Higher rates make it more expensive to purchase a home, increasing monthly mortgage payments and altering budgets.
Lock & Shop is an incredibly useful tool to give homebuyers security, clarity and savings as they complete their search. Let’s take a look at how the program works, as well as what its benefits and requirements are.
magine doing your weekly grocery shopping if the price of items increased between placing them in the cart and scanning at checkout. That can really mess with a weekly grocery budget! Now apply this to your home search. It makes it hard to nail down a budget if the price of a home changes while you’re shopping.
For many homebuyers, one of the first steps will be to get preapproved for a mortgage. During this process, you work with a lender to determine how much home you can afford by looking at a variety of metrics including assets, income and debts. This is different from obtaining loan approval; that comes after you’ve found the home you intend to buy.
When you actually purchase a home and get a mortgage, your mortgage payment will be made up of a few key components, but the largest will be mortgage interest and principal. Mortgage principal is simply the amount you borrowed. Mortgage interest is the cost of the loan itself, what you’re paying to receive the principal. The cost of mortgage interest will be based on your mortgage rate. There are a number of factors that impact this rate. Some of them are unique to your situation, such as your credit score, loan term, location or down payment. Others impact the mortgage market more broadly, such as the bond market, Federal Reserve actions and other factors.
So picture yourself on the hunt for a home. You’ve got a down payment and have been preapproved for a mortgage so you know basically what you can afford. But if mortgage rates increase between your pre-approval and purchase, the cost of your monthly payment could go up, sometimes by hundreds of dollars. That’s because the mortgage rate, or the cost you pay for the loan itself, is higher. This is where Lock & Shop can save you not just money, but stress.
Lock & Shop secures a guaranteed mortgage rate for 90 days while you shop for the perfect home. Should rates go up while you search, you get the lower rate. It’s that simple.
Securing a lower rate on a mortgage can save you thousands of dollars over the lifetime of your loan. Let’s look at an example.
Let’s say you began looking for a home and were quoted a rate of 5% on a 30-year fixed mortgage. What would happen if that rate increased just a few quarters of a point? Here’s an example to consider:
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Start of Search |
End of Search |
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Purchase price: $300,000 |
Purchase price: $300,000 |
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Loan amount: $240,000 |
Loan amount: $240,000 |
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Interest rate: 5% |
Interest rate: 5.75% |
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Monthly payment: $1,288 |
Monthly payment: $1,400 |
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Total 30-year mortgage cost: $463,990 |
Total 30-year mortgage cost: $504,551 |
As you can see here, rising mortgage rates added more than $100 to your monthly payment and added $40,000 to the total cost of financing the home.
House hunting with Lock & Shop would save you big in this example, not to mention all the time you spent worrying about those rates going up!
Lock & Shop is available on a wide variety of loans through Union Home Mortgage, whether you’re considering the flexibility of a conventional loan, or if you qualify for the beneficial terms of a FHA, USDA, or VA mortgage. Your loan officer will ask you to put down $1,000 to lock in your rate, which you can put toward closing costs when you buy your home.
We’re here to help you with your home buying process. Leave it to the dedicated experts at UHM to get you the best mortgage possible with Lock & Shop.
*Interest rate locked for 90 days. $1,000 deposit is required. Deposit is applied to cash to close at loan origination, must participate in Ready, Set, Home! Certified program to be eligible. See https://sweeps.uhm.com/rsh-rl-rules for full terms and conditions.