A mortgage rate lock acts as a guarantee from your lender that your interest rate at closing will be the same as the one you were offered if you meet the criteria. Because mortgage rates fluctuate regularly, your loan rate can change before its fulfillment if you do not have a rate lock in place.

Locking in an interest rate has advantages and disadvantages. If you like the rate offered, you do not have to worry about the rate climbing between the weeks or months from acquiring your loan to getting it. 

Unfortunately, if the mortgage rates fall while the lender processes your loan application, you may not achieve a better deal. In this article, you will learn more about mortgage rate locking and critical factors to consider to guarantee the best possible financial outcome for you.

How It Works

If you do not get anything in writing, ask for a copy of the written terms so you can read it and use it later as proof that you signed the rate lock agreement.

The length of time you have until the lender will no longer retain the rate for you is stated in an agreement to lock in a mortgage rate. Usually, it takes a month or two, but it can vary depending on the circumstances. 

The document should specify the requirements you must complete for the agreement to be valid. If your credit score drops, your down payment increases, so you may want to consider this before taking your next step.

Your mortgage lender can lock in your rate in several ways. Firstly, they may lock in both your interest rate and points. The amount you pay to the lender to lower your mortgage rate is known as a mortgage point, and each point is equal to 1 percent of the loan’s value.

Second, they can lock only your interest rate. Depending on how mortgage rates fluctuate between the time you get your loan estimate and when you close, the number of points you pay upfront may change. 

Finally, you may lock in your rate by waiting. In this case, you lock in your interest rate and point later in the loan application process but before the loan closes.

Lower Mortgage Rates

If you lock your loan, is it possible to lower the rate?

If your lender offers a float-down option, you may lower your mortgage rate after locking in a rate. If interest rates fall, this provision usually allows you one chance to lock in a better rate. You may have to pay to lock in the new rate if you use a float-down option.

Floating or Locking a Mortgage Rate

You can lock in a rate if you like and think it will go up by the time you close. However, unless your lender offers a rate lock, locking in a rate can result in a higher rate than you would get if rates fall.

As for floating a mortgage rate, you may want to think about the cost of using it and any constraints on when you can do so. Remember that if you lock in your interest rate but float your points, you may be charged more points if rates rise before you end your account. You will have to make a higher lump sum payment when the loan is paid off. 


Lastly, share any paperwork with the lenders to help you acquire the most precise offers possible. It will allow you to make appropriate comparisons. Do not hesitate to let the lender know if you see any errors in your loan estimates. 

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