If you’re a homeowner and thinking of maybe refinancing or you’re out shopping for a new home, certainly interest rates are part of the picture. Rates determine your monthly mortgage payment as well as determine affordability. In either case, it’s important to know that any rate you see advertised on the internet or a rate you get from your loan officer aren’t immediately available for you. Mortgage interest rates can change daily and, in some instances, when the markets are somewhat volatile, rates can even change from the morning to later in the day. Regardless, whatever rate you see isn’t any good until you lock that rate in. How do you lock in a mortgage rate and what is the process?

First and perhaps foremost, don’t expect to pick up the phone and call a mortgage company and request a rate lock. Lenders take rate locks just as seriously as you and won’t lock in a rate from someone who’s just placed a phone call. Lenders want a bit more commitment than that. To get to this important first step, it means you must at minimum submit a loan application and provide the requested documentation. 

Lenders can quote rates over the phone to give you a general idea of what the rate market is doing but there are different factors involved when lenders quote a specific rate to a client. FICO scores, occupancy, equity in the transaction matter. Some of this information won’t be known until you apply for the mortgage and send in copies of your paycheck stubs, W2s and other requested documentation.

Once you’ve reached this stage, you might be in a position to lock. But maybe not. There are no universal guidelines lenders must adhere to as it relates to when and how you can lock in a rate. Lenders do have their own rate lock disclosures they use to give you a physical copy of their own rate lock policy. Read it carefully because this disclosure specifically lays out when you can lock in a rate. Your loan officer will also help explain this to you as well.

Rate lock periods can vary but most rate locks can range from 10 to 60 days or more. The longer the rate lock period the higher the rate and/or fees will be. The strategy is to lock in your rate for the shortest period possible while still meeting your settlement date or to give the lender enough time to approve your loan, deliver your loan papers to the settlement agent, sign the papers and return them to the lender for a final review.

Finally, if your rate lock expires while your loan is still in process, most lenders will relock the loan at the higher of the initial rate or current market rates. When someone locks in an interest rate then soon thereafter rates begin to drop, that person might want to let the rate lock expire and then relock at the new, lower rates. In this instance, that person will get the higher of either rate.