What Is A Mortgage Rate Lock?

A mortgage rate lock is a commitment the lender makes to an interest rate in the beginning of your loan application, which lasts for a certain duration while your loan is processing. If the rate fluctuates via market influences your interest rate for your loan will stay the same. This will make sure your rate doesn’t go up and increase your payments with it.

The Length of Your Lock-In Period

However, you have to pay for the length of your lock period and to guarantee a longer lock period will cost more. They will usually agree to hold your interest rate and points for a longer period, like 2 months, but the rates and points might be higher than a shorter lock period. You might commit to a bit of a higher period but still to guarantee it won’t fluctuate above that. It’s a hard call.  

Other Ways to Get a Lower Rate

You don’t just need a shorter lock period to get a lower rate. Putting down a larger down payment will make your interest rate lower because you are putting in a larger share of the price. You can also pay points to decrease the size of the loan by the same principle but you will still be paying more up front. This is usually a good deal for most home buyers.

Closing Costs

Some people choose to finance closing costs but it is wiser to pay them upon closing as it will decrease your interest rate as well. Closing costs are paid by the lender, which are in turn charged to you, and include any fees necessary in the process of closing the loan. Pay it on your closing and you can qualify for a lower rate and deal with less hassle.

Interest Rate Factors

Your offered interest rate has many factors. They are going to look at your FICO® Score and your debt as compared to your income ratio over time. If your credit checks and income show you are likely to pay off your debts, you qualify for a lower rate.


Featured Image: Thinkstock/AlexRaths

Posted on May 22, 2023