Imagine this: You’re looking for a house and get pre-approved for a mortgage. You figure out a way to make the monthly payments work and then, just as you find your dream home, interest rates jump up. Now suddenly your payments are going to be higher, the house is less affordable, and the entire calculus behind the purchase is thrown for a loop.

If only there had been a way to lock in that original interest rate before you found your dream home and actually made an offer.

Now, private mortgage banker Howard Hanna Mortgage is offering to let home buyers do just that.

The company announced Friday that it had launched a “lock and shop” program that “gives buyers the opportunity to get pre-qualified for a mortgage and lock in a mortgage interest rate while they shop for a home.”

“If rates go up before they find that home,” the company said in a statement, “the borrower’s rate stays locked.”

People using the lock and shop program have 30 days to find a home and get under contract. They also have to close on the home within 75 days. The program also provides borrowers with pre-approval status, which Howard Hanna says will make them more competitive when bidding on a house.

However, even with restrictions, the program stands in stark contrast to the way most loans work, which typically require a borrower to have a contract already in place before they can lock in an interest rate.

F. Duffy Hanna

In a statement, Howard Hanna Mortgage President F. Duffy Hanna argued the new lock and shop program could be particularly useful in the near future.

“We have experienced a reduction in interest rates recently, but signs point that rates will go up throughout the year, which could leave buyers with unexpected higher payments,” Hanna said.

Founded in 1983, Howard Hanna Mortgage is the fourth-largest real estate mortgage company in the U.S., serving customers in Ohio, Pennsylvania, Michigan, and West Virginia. It’s the mortgage subsidiary of Howard Hanna Real Estate Services, the largest privately-owned real estate brokerage in the country, which has a wider service area that also includes Maryland, North Carolina, Virginia, and New York.

Its new “lock and shop” program comes as the specter of future interest rate hikes looms over the housing market.

The Federal Reserve raised interest rates four times last year, pushing them to their highest levels since 2008 — when the housing market was imploding. And even before the last of those rate hikes, the rising expense of borrowing money was already costing homeowners and canceling out gains they might have reaped from a cooling market. Though the Federal Reserve doesn’t directly set mortgage rates, its decisions to either raise or lower short-term interest rates typically trickle down and push the home lending market in one direction or another.

Citing an overall strong economy, the Federal Reserve has hinted that it will continue rate hikes this year, though it has not publicly shared any specific plans.

If those rate hikes do materialize, however, they could make programs like Howard Hanna Mortgage’s lock and shop service more attractive to buyers worried about paying more for their homes. And future mortgage interest rate increases may occur regardless of any Fed hikes (or not).

“This program gives the buyer their mortgage interest rate up front,” Hanna added in a statement. “Anxiety over rising interest rates is reduced, giving buyers peace of mind while they are looking for a home.”

Email Jim Dalrymple II

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