Rate Lock

How Rate Locks Function

When a borrower locks a rate, the lender guarantees that specific interest rate and associated discount points for a set number of days, regardless of market fluctuations during that window. Standard lock periods are 30, 45, or 60 days , though some lenders offer locks from 15 to 120 days or longer. Shorter lock periods generally offer slightly lower rates because the lender assumes less market risk. Longer locks may carry a premium of 0.125% to 0.25% or more in rate or points .

Lock Timing and Strategy

Borrowers typically lock their rate after receiving a pre-approval or executing a purchase agreement, but the optimal timing depends on market conditions and loan timeline. Key considerations include:

• Lock too early and the lock may expire before closing, requiring an extension (often at additional cost)
• Lock too late and rates may increase during processing
• Float-down options allow borrowers to benefit from rate decreases after locking, usually for an additional fee

Rate locks are typically documented in writing and specify the rate, points, lock date, expiration date, and any conditions that must be met to honor the lock.

Expirations and Extensions

If the loan does not close before the lock expires, the borrower may need to extend the lock or accept the current market rate. Lock extensions usually cost 0.125% to 0.375% of the loan amount , depending on the lender and duration of the extension. Some delays, such as those caused by the lender, may result in the extension being provided at no charge. The lock agreement terms should be reviewed carefully before signing.