Mortgage rates move daily, sometimes more than once a day. Between the time you apply and the time you close, the rate you were quoted could change. A rate lock is the lender’s commitment to hold a specific rate and set of terms for a specific period. Understanding how locks work helps you ask the right questions at the right time.
What a lock is
When you lock, the lender agrees that your interest rate and the associated points or credits will not change for the lock period, as long as your loan closes within that period and the details of your application stay the same. If rates rise during the lock, you are protected. If they fall, you generally keep the locked rate unless you have a float-down option, described below.
When you can lock
Most lenders lock once you have a signed purchase contract on a specific property, because the rate depends on the loan amount, the property type and the loan program. Some lenders offer a lock before you find a home, sometimes called a lock-and-shop program, with its own conditions. Until you lock, your rate is said to be floating, which means it will be set at whatever the market offers when you do lock.
Lock periods and expiration
Lock periods are commonly measured in increments of a few weeks, and the length should cover your expected closing date with some cushion. Longer locks sometimes carry a slightly higher cost because the lender is taking on more uncertainty. If your closing is delayed past the lock’s expiration, the lender may offer an extension, which can involve a fee, or the loan may be re-priced at current rates. Delays can come from the appraisal, the title work, the seller’s side or your own document responses, so keeping the file moving protects your lock as well.
Some lenders offer a float-down feature, which lets you take advantage of a lower rate if rates drop meaningfully after you lock. These features usually have conditions, such as a minimum change in rate, a one-time use, or an added cost. Ask whether one is available and exactly how it works before you lock.
What a lock does not do
- It does not approve your loan. Underwriting continues separately.
- It does not survive major changes to your application. A different loan amount, a changed credit score, a different property type or a new program can all re-price the loan.
- It does not stop closing costs that are unrelated to the rate from changing, within the limits disclosed on your Loan Estimate.
Questions to ask your lender
- Is my rate locked or floating right now, and when will it be locked?
- How long is the lock period, and what is the expiration date?
- What happens if we close late, and what would an extension cost?
- Is a float-down available, and on what terms?
- Will I receive written confirmation of the lock?
Whether to lock now or wait is a judgment about rate movements that no one can predict with certainty. Your loan officer can explain your options, and a financial advisor can help you think about your overall risk. The important thing is to know your lock status at every step, in writing.
Following a Lock From Contract to Closing
It can help to picture how a rate lock fits into the overall timeline of a purchase. Here is a simplified sequence for a typical financed purchase:
- You go under contract. Your agent sends the signed purchase agreement to your lender.
- You decide when to lock. Your loan officer explains the current rate, the lock period options and any costs. You choose to lock now or float for a time.
- You receive written confirmation. The lock confirmation should show the rate, points or credits, the loan program, the loan amount and the expiration date.
- Underwriting and the appraisal proceed. Meanwhile, the inspection, title work and other contract steps continue.
- You watch the calendar. If a delay appears, you and your loan officer talk about whether an extension may be needed before the lock expires.
- You close within the lock period. The rate on your Closing Disclosure should match your locked rate, assuming the loan details did not change.
Common Rate Lock Mistakes
- Assuming you are locked. Some buyers believe the rate in their pre-approval or Loan Estimate is locked when it is not. Always ask for written confirmation.
- Choosing a lock that is too short. A shorter lock may look slightly cheaper, but if closing slips, the extension or re-pricing can cost more.
- Changing the loan after locking. Switching programs, changing the down payment or adjusting the loan amount can change the locked terms.
- Slow document responses. Delays in sending requested documents are one of the most common reasons loans run long. Respond quickly to keep your lock safe.
- Taking on new credit. A new account can affect your credit and debt picture, which may affect the terms. Check with your lender before any change.
How the Lock Connects to the Purchase Contract
Your rate lock and your purchase contract are separate agreements, but their timelines overlap. The contract sets a closing date; the lock sets a deadline for the rate. Ideally, the lock expiration falls a little after the scheduled closing, giving room for small delays. When you and your agent are negotiating a closing date with the seller, it is worth checking with your lender about realistic timing so the two calendars match. If the seller asks to move the closing date later, that is also a moment to check how the change would affect your lock.
Rate Lock Questions Buyers Ask
Can I lock with one lender and switch to another?
A lock applies only with the lender who issued it. If you switch lenders, you would need a new lock with the new lender at that lender’s current pricing.
Does locking cost money?
Many standard locks have no separate fee, but longer locks, extensions and float-down options may carry costs. Your loan officer can explain exactly what applies.
What if rates fall right after I lock?
Without a float-down feature, the locked rate generally stays in place. That is the tradeoff for protection if rates rise.
Because every lender’s terms differ, ask your loan officer for specifics and check with a financial professional about decisions that affect your broader finances.
