What Does it Mean to Lock Your Mortgage Rate?


If you’re thinking about starting the mortgage process, one of the most important considerations is your mortgage interest rate. After you work with your loan officer on the initial documentation requirements and identify what type of loan works best for you, you’ll probably have the option to lock your mortgage rate.

What is a rate lock?
Locking your mortgage rate means that your lender has guaranteed that rate for a set amount of time. If mortgage rates drop or rise during your set time limit, you’ll keep the rate you and your lender agreed on.


How do you know it’s time to lock your rate?
Nobody can predict what mortgage rates are going to do tomorrow, next week, or next month. Have a conversation with your lender about your rate and payment, and once you’re comfortable with it, it’s likely a good time to lock your rate.


How long does a rate lock last?
In general, lenders give you the option to lock your rate for 30, 45, or 60 days. Many borrowers find that 30 to 45 days is enough, but it really depends on your situation. Your loan officer can help you identify a time frame that will work for your specific transaction.


What can you do if mortgage rates drop after you lock your rate?
If mortgage rates rise after you lock your rate, you’ll probably be celebrating. But if rates drop lower than the rate that you’ve locked in, you might wonder what your options are. It’s common for rates to fluctuate, so don’t worry about trying to beat the market.


But you do have some options if rates drop after you’ve locked your rate:


Stay on your path. If the difference in rates is minimal, it may not be worth trying to negotiate. The impact on your monthly payment could be very small, so don’t sweat it.
Find other options. You could start looking for another lender, but keep in mind that you’ll forfeit money you’ve already spent on fees and costs with your current lender. It’s important to calculate how much you’ve already spent versus what you’d save on the interest rate. Don’t make a hasty decision based solely on the rate!
Float down. Some rate locks include a float down option, which could allow you to “float down” to a lower rate if rates change during your lock period. The borrower usually must pay a fee to secure this option and it can come with specific terms, so make sure you discuss everything in detail with your lender.

Whether you have questions about your current rate or you’re thinking about buying a home, we’re here to help. Get in touch with us today!

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