What is a rate lock? - A rate lock is a commitment from a lender to keep that interest rate for the borrower as long as they meet their necessary rules.

Essentially the lender will hold that rate for your borrower provided that the qualifications are met. For the most part when you lock in on a rate it is only good for a certain duration. you may or may not be able to extend it depending on the lender. In the event that the rates do go down while you have the lock in place you are still locked into the rate that was locked in by you for your borrower.

Mortgage interest rate locks are generally good for between 15 and 60 days. The longer the rate lock the higher the rate. The normal lock period is 30 days. This will give your mortgage broker the time needed to overcome any obstacles that may appear during the loan process. Always ask your mortgage broker how long the rate is locked for and get a rate lock letter to confirm.

Some lenders will allow you to float down. What this does is allow you to you to lock in on the new lower rate in the event that rates does go down since you last locked in.

Always ask for some type of written confirmation of the interest rate that you locked in at. This is your best way to see protect yourself, and ensure the broker locked the rate when you asked them to.

If you are refinancing, be sure to ask if the mandatory 3 day right of rescission is counted in your rate lock. If not, then closing must be held at least 3 days prior the lock expiration for the rate to be honored.

Should I lock my Rate? - When you receive rate quotes for your mortgage, they are just that - quotes. You must request that your rate be locked to guarantee that rate. Usually, your rate can be locked over the phone, with a written application to follow.

Rate Locks are typically 15, 30 or 45 days. Typically, the longer the rate lock, the higher the interest rate you will pay.

If you do lock your interest rate make sure you get a written rate lock confirmation from your mortgage broker.

If your mortgage is through a sub prime mortgage lender you may not be able to lock the rate. In this case your rate will float to close, and your mortgage broker should keep you informed on any increases or decrease in your mortgage rate.

Ask your mortgage professional about the short term forecast of interest rates. There are many tools available to loan officers that will help them determine future interest rate behaviors. A good mortgage professional will have access to these tools and will use them. While they are not 100% accurate nor guaranteed, they are for the most part reliable and do provide valuable information on how to predict what the market will do in the upcoming week.

In a rising interest rate environment locking your interest rate may be beneficial for the peace of mind it offers. Obtaining a mortgage is a stressful transaction without the additional worry of increasing interest rates. If you would feel most comfortable with a locked interest rate be sure to let your loan officer know.

Ask your mortgage professional for a copy of the rate lock confirmation. This will give you piece of mind, knowing that you are getting the rate that you were quoted all along.

What is a RATE LOCK and why do I want to do it? - A rate lock is a promise by the lender to honor a particular interest rate for a specific period of time.

You want to lock your rate in because this is what guarantees that you will have the locked in rate for the amount of years that your home loan program allows. Different lenders have different rate lock guidelines and different rate lock periods. One lender may allow you to lock a rate for up to 180 days (6 months) and another may allow you to go up to 360 days, or 1 full year on the rate lock. The longer time period you lock you rate in for the higher the rate will be usually. A 15 day, or less, rate lock will generally provide you with the best rate and pricing and a 90 day ratel lock will probably be at least .25%-.5% higher. Some leneders will even charge money upfront for a long rate lock, such as 6 or 12 months.

Always be sure your mortgage lender gives you a rate lock letter when they lock the rate. This letter will display the mortgage terms and how long the rate is good locked for and what the interest rate is.

No one can tell you exactly what interest rates are going to do from day to day and hour to hour so that is when rate locks come in handy. They protect you in a rising interest rate market however you are still locked even if rates decline once you have decided to do so. Being comfortable with the payment is a good time to lock in the rate.

Some banks offer a one time float down if interest rates decrease after an interest rate has been locked. In some cases, the borrower may have to pay for a float down.

Make sure you review your rate lock with your mortgage broker and/or real estate agent. In the case of a refinance your rate lock should extend a couple days past the end of your rescission period, which will be a full three business days after your closing day. In the case of a home purchase you should make sure the rate lock lasts a couple days past your closing day.

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