Locking in a Rate

Locking in your interest rate simply means that your lender has agreed to maintain a specified interest rate and number of points for you. Also called a rate lock or a rate commitment, locking in your rate assures you that the rate won't change for a fixed period of time, often while your application for the loan is in processing. Details change depending on the lender, but rates can be locked in when you apply for the loan, while your application is in process, immediately following your lenderýs approval of the application, or at some later time.

Locking in your rate is a way to assure that your rate doesn't go up in the time it takes for the deal with your lender to be complete. Many factors can contribute to the interest rate you receive on your loan. These include whether you have a fixed rate mortgage or adjustable rate, the size of your down payment, whether you pay all of the closing costs or not, and your credit quality and debt-to-income ratio. All these factors represent choices you make or factors specific to you personally that can affect the interest rate you receive on your mortgage.

However, interest rates are also time-sensitive. Changes in the outside world, such as the strength of the economy and financial markets, can affect the current interest rates being offered for mortgages. While these rates follow trends and may be generally lower or higher for long time periods, there are also fluctuations that occur over short periods of time. Locking in your rate allows you to not worry about interest rates going up while you are working on getting your loan set up and taking care of all the details in what is always a major transaction.