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A Lock-in or Rate Lock on a mortgage means that your Interest Rate will not change between the offer and closing, as long as your loan is closed within a specified time and there are no changes in your mortgage application.
Mortgage rates can fluctuate daily and sometimes hourly. Rate locks are typically available for 30, 45 and 60 days and sometimes longer. If your rate is not locked, it can change at any time.
There is also a down side to a rate lock. If your transaction needs more time, it may be expensive to extend it. If rates fall after you receive your loan offer, it may lock you out of a lower rate.
Page 1 of your Loan Estimate shows you whether or not your Interest rate is locked and for how long. Some lenders may not lock your interest rate.
If there are changes to your application, Income Amount, Credit score or verified Income, your Interest rate can still change despite the Rate Lock.
Some of the common reasons your Interest rate might change despite a rate lock:
(a) Change in Type of Loan (b) Appraisal on the House comes in too high or too low (c) Change in your Credit score (d) Change in Verified Income
It is recommended that a Rate Lock Agreement is long enough to cover the time till Closing.
Related Topics: The Loan Estimate (LE) The Closing Disclsoure (CD) Good Faith Estimate (GFE) Uniform Residential Loan Application What is a Credit Check What is a Credit Score What is an Appraisal
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