When Should You Lock Your Mortgage Rate?

Mortgage rates move constantly, sometimes several times in a week. Between the day your offer is accepted and the day you close, a change in rates can change your monthly payment. A rate lock protects you from that. Many buyers, especially first-time buyers and those new to the United States, do not know when or how to lock. Here is how it works.

What a rate lock is

A rate lock is a commitment from your lender to hold a specific interest rate for you for a set period, as long as your loan closes within that period and nothing material changes in your application. If rates rise while you are locked, your rate stays the same. If they fall, your rate usually stays the same too, unless your lock includes a feature that allows a one-time adjustment.

When to lock

In most cases, the time to lock is once you have an accepted offer on a specific home. Before that, the lender has no property and no closing date to lock against.

Some buyers try to wait for rates to drop before locking. Nobody can reliably predict where rates will go, and waiting is a bet. If a change in rates would stretch your budget, locking early gives you certainty. Talk with your loan officer about your situation, and decide together rather than waiting by default.

How long a lock lasts

Locks come in different lengths. A longer lock may cost more or come with a slightly higher rate, because the lender is holding the rate for longer. The right length depends on your closing date, with some room for delays. Ask your lender to explain the options and their costs.

What happens if closing is delayed

Delays happen: an appraisal takes longer, a condo questionnaire comes back slowly, repairs need to be finished, or documents are missing. If your lock expires before you close, you may need to pay to extend it, or accept the current rate, which could be higher.

You can reduce that risk:

• Choose a realistic closing date and a lock long enough to cover it.
• Send documents to your lender quickly, and respond to every request the same day if you can.
• Start the condo or HOA paperwork early if the home is in an association, since those documents often take time.
• Keep your finances unchanged until closing: no new debt, no job change, no large unexplained deposits.

Float-down options

Some lenders offer a float-down, which lets you take a lower rate once if rates fall significantly during your lock. It usually has a cost and conditions. It can be worth asking about, but read the terms.

Rate locks and new construction

New construction homes can take many months to build, longer than a standard lock. Builders and their lenders sometimes offer extended locks or rate incentives. Compare these offers carefully and understand what happens if construction runs late.

Questions to ask your lender

• When do you recommend I lock, and for how long?
• What does the lock cost, and what does an extension cost?
• Is a float-down available?
• What could cause the locked rate to change?

Planning ahead

A rate lock is one small step in a purchase, but timing it well protects your budget. I coordinate closely with my clients' lenders so the lock, the inspection period, and the closing date all fit together. If you are preparing to buy, reach out to me and I can introduce you to lenders I trust.