Locking in an Interest Rate

Helping our clients secure the best possible rate for their loan is one of our team's primary goals. Therefore, we wanted to share some insight about the intricacies of locking rates —how and when to lock, what happens if rates change during the process, etc. Knowing this information in advance can save your clients a lot of aggravation, time and money so take a moment to educate yourself on the topic. 

WHAT DOES IT MEAN TO “LOCK” IN AN INTEREST RATE?

Mortgage interest rates can change daily, sometimes hourly. To lock in an interest rate, you make an agreement with a lender that keeps the rate on your loan application from fluctuating. However, you must close within the specified “rate lock” period which will ensure your qualifications and loan parameters stay the same. Before the interest rate can be secured, we work with you to obtain your approval of the terms. This includes the rate, loan program and duration of the rate lock. Your rate is not locked until you have written confirmation from our team of the lock request.

WHEN SHOULD I LOCK IN AN INTEREST RATE?

Economic news can cause the market to fluctuate. It is a good idea to monitor rates and lock in on a day when they have hit a low point. We may share market information that can help you identify a good time to lock in a rate, but ultimately it is your decision. You might prefer not to monitor the market—in this case, consider locking in the rate earlier in the application process. You can lock in at any point during the approval process, up to roughly a week before closing. Contact us as often as you’d like to get updated rate quotes.

HOW LONG SHOULD I LOCK MY RATE?

The most common rate lock periods are 15, 30, 45, 60 and 90 calendar days. Typically, lenders offer better terms for shorter term rate locks. Also, some longer lock periods (60 days or more) have additional fees. You should not lock in your rate until you are confident that you will close before the rate lock expiration date. Closing timelines are very unpredictable so it is important to work with your attorney and real estate agent to determine the best time frame for you. For transactions that require approval from a co-op or condo board or involve probate or short sales/foreclosures, the rate lock period may need to be longer.

WHAT HAPPENS IF I DON’T CLOSE BEFORE MY RATE LOCK EXPIRATION DATE?

If there is a possibility that you might not close on time, for any reason, reach out to us immediately. Unforeseen circumstances, such as the inability to locate required documents, can cause a roadblock. If you miss your expiration date, you may be charged extension fees to keep your current rate. Alternately, you may receive rates that are worse than your initial rate lock. For these potentially costly reasons, it’s crucial to leave enough time between the rate lock expiration date and the anticipated closing date.

WHAT IF RATES CHANGE AFTER I LOCK MY RATE?

If rates go up, the rate you locked in will be honored as long as you close before the rate lock expiration date. If rates go down, we can attempt to get a pricing exception. An exception is not guaranteed and they are only considered on a case-by-case basis.

CAN I RELY ON INTEREST RATE QUOTES FOUND ON THE INTERNET?

Interest rates are transaction-specific. An accurate quote is based on several different loan characteristics such as loan amount, financing percentage, property type, credit score, and points/discount fees. Since it’s impossible to provide transaction-specific rate quotes through advertising, online quotes are likely to be inaccurate. Interest rates are also state/region-specific. Each lender has specific guidelines and may not offer financing in every area. When searching for interest rates online, always read the fine print for details and fees associated with the quote. When you work with a mortgage professional, your unique transactional details are taken into consideration and a more accurate quote can be provided.

Information provided is for educational purposes. We encourage you to perform independent research of market conditions prior to requesting a rate lock.

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