My life revolves around a 30 day time period. Why is this? The normal length of a real estate contract is 30 days. This is also the standard length of a locked interest rate. Unlike a stock that someone buys and holds, the timing on buying an individual stock is not that important, because hopefully you can hold that stock for a long period and weather the ups and downs of the market.
A mortgage interest rate is different, and can be much more costly if you do not plan the lock correctly. I have one shot to educate my clients on the market and execute a rate that fits their needs. This can be hard during a volatile market where rates can change twice a day. This can also be tricky because so many factors play into a client’s interest rate. Many people do not know that an interest rate is basically a bond that is traded just like a stock. The bond is called a Mortgage-Backed Security. Large investment companies, insurance companies, and even other countries purchase Mortgage-Backed Securities.
Since it is a bond, it has a fixed payment to the investor. Bonds are considered a low risk investment, so the return is not as big as a potential stock return. So, often if the economy is doing poorly, the bond market is doing better because it is considered a safer bet. This is the opposite from the stock market because a better economy drives up the price of a stock. Many times the stock market and bond market run in different directions. If the bond market is doing well and the price of a bond is increasing, that means that mortgage rates are decreasing. This is always good for mortgage clients.
I always point out to potential clients that if you are talking with a lender, ask them how rates are determined and what the market is doing. If they cannot explain this simple concept I mentioned above, I would run. And run fast.