Real Estate Guide

Your Mortgage - Questions and Answers
'Interest Rate Lock-Ins'

• How do you "lock in" an interest rate?
• Do you advise a lock-in on a home loan?
• What is the value of a mortgage lock-in?

How do you "lock in" an interest rate?

Most lenders will have preprinted forms that set out the exact terms of the lock-in or rate lock agreement, as it's sometimes called, and may require a fee to do so. Others may only make an oral lock-in promise on the telephone or at the time of application. You'll do yourself a favor if  you always get it in writing.

Resources:

• "Consumers Guide to Mortgage Lock-Ins" ; Publications and Educational Resources, The Board of Governors, Federal Reserve System.

Do you advise a lock-in on a home loan?

A lock-in given at the time of application can be useful because it may take the lender several weeks or longer to prepare a loan application (though automated loan practices are cutting this time dramatically). However, some lenders require borrowers to pay lock-in fees to assure particular rates and terms. Be sure to check that your loan's rates and points are guaranteed and that your lock-in period is long enough to both complete your loan and work through the other contingencies in your purchase contract. If your lock-in expires, most lenders will offer the loan based on the new prevailing interest rate and points.

Resources:

• "Consumers Guide to Mortgage Lock-Ins" ; Publications and Educational Resources, The Board of Governors, Federal Reserve System.

What is the value of a mortgage lock-in?

Locking in a mortgage rate with a lender is one way to ensure that same rate still will be available when you need it. Lock-ins make sense when borrowers expect rates to rise during the next 30 to 60 days, which is the usual length of time lock-ins are available.

Resources:

• "Consumers Guide to Mortgage Lock-Ins" ; Publications and Educational Resources, The Board of Governors, Federal Reserve System.