Mortgage rates are constantly changing… so locking in a rate with your lender is usually a good idea.
With a mortgage rate lock, your lender commits to honor a specific interest rate for a specific period of time. If market rates rise after the rate is locked the lender will honor the lower locked rate. However, if rates fall after the rate is locked the borrower probably will not be able to take advantage of the lower rate.
A rate can’t be locked until the buyer has an accepted offer to purchase signed by the seller. Also, there are circumstances where your interest rate can change, even though it is locked. For example:
- If the appraisal on the home comes in lower than the sale price
- If you want to make changes to the loan or down payment
- If your credit report uncovers some red flags which affects your credit score
- If your stated income cannot be verified.
Normal rate locks are usually for 30 to 60 days but can be shorter or longer… and, usually, the longer the rate lock the higher the interest rate will be. Always be sure to get your rate lock agreement in writing.
