When you're looking for a mortgage, you're likely to shop among
home loan providers for the most favorable mortgage interest rate,
and the lowest points and other up-front charges. When you find
the most favorable terms and the home loan or mortgage lender
that you want, you'll apply to that company.
Lock-ins are a way to ensure
that at settlement, what you requested from your home loan or
mortgage lender is what you'll get.
What is a Lock-In?
A lock-in, also called a rate-lock or rate commitment, is a home
loan or mortgage providers promise to hold a certain interest
rate and a certain number of points for you, usually for a specified
period of time, while your home loan or mortgage lender application
is processed.
Depending upon the home loan or mortgage lender, you may be able
to lock in your interest rate and points when:
you file your application;
during processing of the loan;
when the loan is approved; or later.
| Pro |
Con |
| Lock-Ins protect you against
increases while your application is processed. |
A locked-in rate may prevent
you from taking advantage of price decreases during this period. |
Will Your Lock-In Be in Writing?
It is wise to obtain written, rather than verbal, lock-in agreements
to:
fully understand how your lender's lock-ins work; and
have a tangible record of your arrangements with the lender
in the event of a dispute.
Will You Be Charged for a Lock-In?
Home loan or mortgage lender may charge you a lock-in fee that
may or may not be refundable if you do not close your loan. The
amount of the fee and how it is charged will vary among home loan
or mortgage lender and may depend upon the length of the lock-in
period.
How Long Are Lock-Ins Valid?
Lock-ins of 30 to 60 days are common but lock-in time periods
may range from 7 to 120 days. Usually, the longer the period,
the greater the fee.
Before deciding on the length of your lock-in:
ask your lender to estimate (in writing, if possible) the time
needed to process your loan;
factor in any delays that might impact settlement (construction
issues, etc.); and
ask for a lock-in with as few contingencies as possible.
What Happens if the Lock-In Period Expires?
If your lock-in period expires, you might lose the interest rate
and the number of points you had locked in. Most mortgage lenders
will then offer the loan based on the prevailing interest rate
and points, which may now be higher due to market conditions.
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