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\n <\/div>\n \n Find a Top Buyer\u2019s Agent to Guide You<\/h3>\n
HomeLight can connect you with a top real estate agent familiar with the mortgage application process and home listings in your area. We analyze over 27 million transactions and thousands of reviews to determine which agent is best for you based on your needs.<\/p>\n \n
What\u2019s a mortgage loan rate lock?<\/h2>\n
A rate lock is an agreement you make with your mortgage lender to guarantee your interest rate while they work to close your loan. Locking in a rate is an essential step to getting a home loan.<\/p>\n
When you sign the papers to finalize the loan, that<\/em> will definitely lock in the rate. However, a mortgage loan rate lock is also something you can do much earlier in the process. It\u2019s an important way to manage risk and control costs.<\/p>\n As you already know (or will soon learn), the interest rate on your home loan is one of its most important features. A lower rate is better because it means you\u2019ll be paying less interest, and the loan won\u2019t cost you as much over time.<\/p>\n The interest rate<\/a> can noticeably affect your monthly payment \u2014 the higher the rate, the bigger your payment will be. And over the life of a typical mortgage, even small differences in the loan\u2019s interest rate can make a difference of thousands or even tens of thousands of dollars in the total amount you\u2019ll pay to own your house free and clear. (More on that in a minute.)<\/p>\n With this in mind, when you\u2019re shopping for a loan, the interest rate that lenders offer will be a major consideration. However, interest rates change constantly according to the tides of the financial markets. The rate you are quoted today is only today\u2019s rate. Tomorrow\u2019s rate is often not the same.<\/p>\n It typically takes 4-6 weeks to close<\/a> on a mortgage loan. Your lender needs that time to evaluate your loan request and prepare the necessary documents.<\/p>\n During that time, interest rates can \u2014 and often do \u2014 go up or down by significant amounts. So how can you be sure that the interest rate that attracted you to your lender and your loan will actually be the rate on the loan documents you eventually sign?<\/p>\n The answer is the mortgage loan rate lock. Some lenders and brokers may also refer to it as a lock-in or rate commitment. By any name, this is an agreement your lender makes to guarantee that the interest rate you agree to pay today will be the rate on your loan documents when you sit down for closing.<\/p>\n Without a rate lock, the interest rate you finally agree to may have floated above what you planned to pay. It may make the loan a lot less attractive. It may even be more than you can afford!<\/p>\n Luckily, a rate lock is a common feature of most loans. Many experts not only recommend rate locks to others but also use rate locks themselves when they are taking out a mortgage.<\/p>\n \u201cWe have a wide range of customers \u2014 like myself \u2014 who always immediately lock as soon as they can,\u201d says John Boyles<\/a>, a mortgage expert with more than 20 years of experience. \u201cI never float. If it\u2019s a rate I like, I take it.\u201d<\/p>\n Boyles explains that he is a risk-averse borrower. More certainty around the cost of the money he\u2019s borrowing gives him peace of mind.<\/p>\n It also lets him plan for the future with confidence because he can correctly anticipate his mortgage payment amount. That\u2019s also true of ordinary borrowers who are similarly wary of taking on too much risk.<\/p>\n \u201cWhen they lock their loans, they\u2019re transferring the risk of the rate rising during the time it takes to process the loan,\u201d Boyles explains. \u201cThey\u2019re giving it to the lender, broker, or loan officer, so they are now responsible for handling that interest rate risk.\u201d<\/p>\n This doesn\u2019t mean you have to agree to a rate lock. But it may suggest that a rate lock is something to look into. To begin, let\u2019s check out the major features of a mortgage loan rate lock.<\/p>\n Here\u2019s what is covered in a typical rate lock agreement:<\/p>\n A rate lock agreement often will include a float-down provision<\/a> that describes what happens if rates go down before your closing. It also covers what happens if you don\u2019t close the loan before the rate lock expires.<\/p>\n The short answer to why you might want a rate lock is simply because rates are moving constantly, and even small changes can add up to a lot of money over years and decades.<\/p>\nRemember: The loan process takes time<\/h2>\n
Rate locks as a risk management tool<\/h3>\n
The main elements of a mortgage loan rate lock agreement<\/h2>\n
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Why would you want a mortgage rate lock?<\/h2>\n