Rate Lock Tips to Help You Get the Best Rate

Mortgage Rate Lock Tips: When Should You Lock Your Interest Rate?

Mortgage rates can change quickly—sometimes more than once during the same day. That makes one of the most important decisions during the home loan process:

Should you lock your mortgage rate now or wait and hope rates improve?

There is no perfect answer because nobody can consistently predict where mortgage rates will go next. But understanding how rate locks work—and what you're actually locking—can help you make a much better decision.

What Is a Mortgage Rate Lock?

A mortgage rate lock is an agreement between you and the lender that locks the interest rate and associated loan pricing for a specific period of time.

Once your rate is locked, normal market movements generally won't increase your locked rate during the lock period.

That protection works both ways.

If mortgage rates rise after you lock, you're protected from the market increase. If mortgage rates fall, you generally don't automatically receive the lower rate unless your lender offers a float-down or similar option.

That's why deciding when to lock is important.

What Does It Mean to Float Your Rate?

When you float your mortgage rate, you have not yet locked it.

Your rate and loan pricing continue to move with the mortgage market.

If rates improve before you lock, you may benefit. If rates increase, however, the rate available when you finally lock could be worse.

Floating is essentially accepting additional market risk in hopes of getting better pricing later.

Should You Lock or Float?

Your decision should depend on several factors:

• How soon you expect to close
• Current mortgage market conditions
• Your tolerance for risk
• Whether important economic reports are coming up
• How much a higher rate would affect your payment and qualification
• Whether you are purchasing or refinancing

Trying to catch the absolute bottom of the mortgage market is extremely difficult.

If today's rate and loan price accomplish your financial goals, locking can eliminate uncertainty.

Buying a Home?

For a purchase transaction, I generally lean toward reducing risk.

Once you're under contract, you have a closing deadline. A sudden increase in rates can increase your payment, increase your debt-to-income ratio and, in some cases, potentially affect your ability to qualify.

Saving a little more by waiting for rates to fall can be attractive—but you have to weigh that potential savings against what happens if rates move in the opposite direction.

Refinancing?

With a refinance, you may have more flexibility because you usually aren't working against a purchase-contract closing date.

That can sometimes make floating more reasonable.

But the same principle applies:

If the numbers make sense today, don't automatically risk a good loan trying to catch the perfect one.

How Long Does a Rate Lock Last?

Rate locks are available for specific periods, commonly 30, 45 or 60 days, although shorter and longer periods may be available depending on the lender and loan program.

The loan generally needs to close before the rate lock expires.

Longer locks may also have different pricing than shorter locks. This is why you shouldn't automatically choose the shortest lock simply because its pricing looks slightly better.

The lock needs to be long enough to realistically get your loan closed.

What Happens If My Rate Lock Expires?

If your loan doesn't close before your lock expires, you may need a rate-lock extension.

Extensions can cost money, and the lender's extension policy can vary.

This is another reason experienced loan management matters. Locking for 30 days when your transaction realistically needs 45 days may save a little money initially but potentially cost more if the lock has to be extended.

Whenever possible, your lock period should include enough time to comfortably reach your expected closing date.

Can My Rate Change After I Lock?

A rate lock protects you from normal mortgage-market movements, but it doesn't necessarily protect you when important details about your loan change.

For example, your pricing could potentially change if there is a change involving your:

• Loan amount
• Credit score
• Property value
• Down payment
• Occupancy
• Property type
• Loan program
• Loan-to-value ratio
• Loan purpose
• Other information used to determine your loan pricing

The important distinction is this:

A rate lock protects you against market movement. It doesn't necessarily protect you against changes to the loan itself.

Don't Confuse a Rate Quote With a Rate Lock

This is extremely important.

A mortgage rate quote is not necessarily a locked mortgage rate.

You may see an attractive rate advertised online, receive an automated quote or talk with a lender who gives you a rate over the phone.

That doesn't necessarily mean you can actually lock that rate for your particular transaction.

Mortgage pricing depends on many details specific to you, your property and your loan.

Why Generic Advertised Mortgage Rates Can Be Misleading

The lowest mortgage rate you see advertised may be based on a very specific borrower and property scenario.

Your actual mortgage rate and loan price can be affected by factors including:

Credit Score

Credit scores can have a significant effect on mortgage pricing, particularly with conventional financing.

Down Payment and Loan-to-Value

The relationship between the property value and loan amount can affect your pricing.

Loan Amount

Mortgage pricing can vary depending upon the amount you're borrowing and the loan program.

Property Type

Pricing may differ between:

• Single-family homes
• Condominiums
• Manufactured homes
• Multi-unit properties

Occupancy

A primary residence, second home and investment property may each receive different pricing.

Loan Purpose

Pricing can differ between:

• Purchase loans
• Rate-and-term refinances
• Cash-out refinances

Loan Program

Conventional, FHA, VA and USDA loans are priced differently.

A government-backed loan might offer a lower interest rate than a conventional loan, for example, but mortgage insurance, guarantee fees and other costs also need to be considered.

Loan Term

A 15-, 20- and 30-year mortgage can have different rates and pricing.

Fixed vs. Adjustable Rate

Fixed-rate and adjustable-rate mortgages are also priced differently and involve different long-term considerations.

Compare Mortgage Rates on the Same Day

Mortgage rates fluctuate.

If you get a quote from Lender A on Monday and another from Lender B on Thursday, you aren't necessarily making a meaningful comparison.

The mortgage market may have changed substantially between those two quotes.

For the most accurate comparison, get competing quotes as close together as possible and make sure you're comparing the same loan scenario and the same lock period.

Don't Shop Just the Interest Rate—Shop the Loan Price

One of the biggest mistakes borrowers make is focusing exclusively on the interest rate.

Interest rate and loan cost are connected.

You can often obtain a lower interest rate by paying additional points or lender fees.

You may also be able to reduce your upfront lender costs by accepting a somewhat higher interest rate.

For example, one lender could quote a lower rate but charge thousands more to obtain it. Another could offer a slightly higher rate with substantially lower costs.

Which loan is better?

You can't know from the interest rate alone.

You have to compare the rate AND the cost to obtain that rate.

That's what I mean when I say:

Shop the Loan Price, Not Just the Rate

Ask each lender:

What interest rate am I getting, what does that rate cost me, and how long can I lock it?

That's a much more meaningful comparison than simply asking:

"What's your rate?"

Check Your Loan Estimate

Your Loan Estimate is one of the best tools for verifying your loan terms.

At the top of Page 1, you can see whether your interest rate is locked and, if so, when the lock expires.

When comparing lenders, look beyond the headline rate. Compare the rate, points, lender credits, lender fees and other applicable loan costs.

My Rate-Lock Rule of Thumb

There is no strategy that guarantees you'll lock at the lowest possible point in the market.

Rates could improve tomorrow.

They could also get worse.

The objective isn't necessarily to beat the mortgage market by an eighth of a percent.

The objective is to get a competitive combination of rate and cost that works for your financial situation while making sure your loan closes successfully.

If you're purchasing a home and today's numbers work, protecting those numbers can often be more important than gambling on what rates might do next.

If you're refinancing and have more flexibility, floating may sometimes make sense—but you should understand the risk before doing it.

Before You Lock, Ask These Questions

Before locking your mortgage rate, make sure you know:

• What is my exact interest rate?
• What points or lender fees are associated with that rate?
• How many days is the rate locked?
• When does the lock expire?
• Is the lock period long enough for my expected closing date?
• What happens if the loan doesn't close before the lock expires?
• What does a lock extension cost?
• Does the lender offer a float-down if rates improve substantially?
• What changes to my loan could affect the locked pricing?

Getting these answers upfront can prevent unpleasant surprises later.

The Bottom Line

Mortgage rates matter, but the lowest advertised rate isn't automatically the best mortgage.

You need to consider the interest rate, lender costs, loan program, lock period and total financial benefit together.

And remember:

The only mortgage rate that really matters is the one you can actually lock for your specific loan.

Don't be afraid to get a second opinion before you lock. Comparing the complete loan price—not just the advertised interest rate—could save you thousands of dollars.

---

Disclaimer: This article is for general educational purposes and reflects mortgage-industry experience, not legal or financial advice. Loan programs, pricing, guidelines and rate-lock policies vary by lender and can change. Verify the specific terms and lock policies with the lender handling your loan.