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It’s usually best to wait until you have a purchase agreement in hand to lock in your mortgage rate.
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A mortgage interest rate lock guarantees your interest rate won’t change for a set period of time.
This protects you from rising interest rates and sudden market changes.
Once you find a home and interest rate you’re happy with, it’s a good idea to lock in your rate as soon as possible.
Mortgage rates are constantly rising and falling, and when you’re financing a home purchase, even a slight increase can cost you thousands of dollars over the life of the loan. That’s why most buyers choose to lock in their rate before closing.
A mortgage rate lock protects you from interest rate changes as long as you close within a specific time frame. Patricia Maguire-Feltch, national sales executive at Chase Home Lending, advises that once you’ve found the home you want at an affordable price, you should lock in the rate as quickly as possible.
What is a mortgage rate lock?
A mortgage rate lock guarantees a specific interest rate while you’re moving through the homebuying process. Once your rate is locked in, it won’t change, which will protect you from rising interest rates. However, if the information on your application changes — for instance, your credit score drops or you lose your job — your rate lock could be voided.
According to Maguire-Feltch, rate locks usually last from 30 to 90 days, and you can lock in an interest rate up to five days before closing. Some lenders will lock in your rate for 120 days or more.
If you aren’t able to close before your rate lock expires, you may have to pay an additional fee to extend it. The policies can vary depending on your lender, but a rate lock is usually available anytime you buy or refinance a home.
Important: If you have a fixed-rate loan, a mortgage rate lock sets your rate for the remainder of the loan. With an adjustable-rate mortgage, a rate lock only guarantees your initial rate.
How does a mortgage rate lock work?
A mortgage rate lock allows a homeowner to get the best interest rate possible during the homebuying process. Your lock rate is based on the following criteria:
Down paymentClosing costsCredit scoreYour loan programThe value of your home
Most lenders will let you lock in a mortgage rate once your purchase contract has been accepted. Some will let you lock in a rate even earlier, like once they’ve approved your application and issued a loan estimate.
Your rate lock will come with an expiration date. Once it expires, your interest rate may rise or fall depending on what’s happening in the market. If you lock in an interest rate before you’re under contract on a home, you risk having it expire before closing.
For that reason, it’s usually best to wait until you’ve found a home and made an offer before locking in your rate. The only exception is if interest rates are expected to rise soon.
Quick tip: After applying for a mortgage, your lender will send you a loan estimate document, which outlines important details about your loan, including whether or not your interest rate is locked in.
4 steps to getting a mortgage rate lock
Locking in your rate allows you to get the best deal possible, especially if interest rates are on the rise. Here are four steps you can take to get a mortgage rate lock.
1. Find a lender you want to work with
The first step is to research a few different lenders and choose the one you want to work with. See what kind of loan offers you receive and calculate what your monthly payments might be using a mortgage calculator. This will help you choose the lender that’s right for you.
2. Ask your loan officer about locking in a rate
Once you’ve picked a lender, you can ask your loan officer about a mortgage rate lock. They can explain their policies and make recommendations about when you should lock in your rate.
3. Choose a rate lock period
Next, you need to select a rate lock period. The amount of time you choose will depend on whether or not you’re under contract on a home. Make sure the rate lock period you choose is long enough to last until closing — otherwise you may have to pay to extend it.
Maguire-Feltch recommends locking your rate shortly after you’ve found a home, since mortgage rates fluctuate frequently.
“If you find a house you love, and you are comfortable with the payment, we suggest locking that rate so you have certainty of what your payments will look like on your home loan,” she says.
4. Lock in your rate
Once you’re happy with the interest rate and rate lock period, it’s time to lock in your mortgage rate. Some lenders will let you do this online, or your loan officer can do it for you.
Quick tip: If interest rates go down after you’ve already locked in your rate, ask your lender if you can use a float-down lock. This provision lets you take advantage of lower interest rates after you’ve already locked in your rate. Note that some lenders charge a fee for float-down locks.
Pros and cons of a mortgage rate lock
Most borrowers choose to lock in their interest rate because it ensures they won’t get stuck with a higher rate should market conditions suddenly change. A low interest rate can save you thousands of dollars over the life of the loan.
However, this means you may be unable to take advantage of falling interest rates. And if you lock in too early, your lender may charge a daily fee to extend it past closing. Here are some of the main pros and cons of a mortgage rate lock.
Pros
Cons
It can prevent you from getting stuck with a higher interest rate down the road.Most rate locks are free for at least 30 days.A lower interest rate could save you thousands of dollars over the life of the loan.You may not be able to take advantage of falling interest rates.If you lock in too early, you may have to pay to extend it.Your lender may be able to void the rate lock if certain items on your credit score or application change before closing.
Frequently asked questions
When do you lock in a mortgage rate?
It’s usually a good idea to wait until you have a purchase agreement before locking in your rate. The only exception is if interest rates are unusually low and expected to go up soon.
How long does a mortgage rate lock last?
Most mortgage rate locks last between 30 and 90 days, but the exact time frame depends on your lender. Some lenders will lock in your rate for 120 days or more.
What if mortgage rates drop after I’ve locked one in?
It’s impossible to know what the market will do, and there’s always the possibility that interest rates could fall. That’s why some lenders offer a float-down option, which allows you to reduce your locked rate if market rates suddenly fall.
A float-down option offers a little more security in a volatile market and allows you to take advantage of falling interest rates. Maguire-Feltch says you may be able to move to a lower rate even without the float-down option, but reducing your rate without it may require additional fees.
How much does a rate lock cost?
That depends on your lender. Some lenders don’t charge anything to lock in your rate, while others charge between 0.25% and 0.50% of the loan amount.