Locking Your Interest Rate
A Rate Lock Agreement is an agreement in writing signed by the Borrower and the Lender that specifies the number of days for which a mortgage’s interest rate and fees will be guaranteed by the Lender.
Mortgage interest rate movements are as hard to predict as the stock market and no one can really know for certain whether they'll go up or down at any given time. If you have a hunch that rates are on an upward trend then you'll want to consider locking the rate as soon as you are able. If you think interest rates might drop while your loan is being processed, you have the option take a risk and let your rate "float" until the time seems right for you to lock.
Rate Lock Periods
A Rate Lock Period or a Rate Commitment is a promise to hold a certain interest rate and a certain number of points for a specified period of time while your application is being processed.
Rate Lock Periods can vary in length and traditional Rate Lock Periods are 25, 40 or 55 days, but you can lock your interest rate for a longer period of time (up to 180 days). However, in exchange for the longer Rate lock Commitment, the rate and fees will be higher than those of a shorter period.
Before you decide to lock, be certain that your loan can close your transaction within the Rate Lock Period. It won't do any good to lock in if your rate expires before you are able to close. Rate Lock Extension Fees can be expensive. If you are purchasing a home, review your contract for the estimated closing date to help you choose the right Rate Lock Period. If you are refinancing, in most cases, your loan will close within 30 days.
When Can I Lock?
Once your Loan Application has been reviewed and a specific property address has been designated then you may lock your interest rate. You will receive confirmation of your Rate Commitment shortly after you let your Loan Officer know that you agree to the terms presented to you.