For consumers and borrowers looking to secure a mortgage, locking in to the lowest rate possible is critical to your success. A mortgage rate lock enables borrowers to lock in the original rate that they were quoted when they first applied for a loan from their lender. Not all lenders allow borrowers to lock in their rates, but those who do will usually allow for a rate lock at the beginning, when the loan is filed, or during the application process. Most borrowers prefer to lock in their rates when they first submit the loan, since this will protect them from potential rate or point increases that may occur during the home loan application process.
If you’ve been mortgage shopping, you’ve probably seen a lot of interest rates – some lower than others. You’ve probably also been following news reports about the recent increase in rates, and even though rates are still near record lows, it’s pretty obvious that now is the time to take out a new mortgage or refinance an existing one. Of course, once you do decide to apply for a mortgage, it takes time – usually a few weeks – before the mortgage will be finalized. At the end of that time, you want to be sure you end up getting the same low rate that was in effect when you submitted your application. The way to do that is by locking in your rate, and maybe even your points.
A lock protects you from potential rate increases while your loan is being approved, it can also mean you are unable to take advantage of decreases in the interest rates that may occur while your loan is being processed. In a market where you aren’t sure whether rates will fall or not, you might choose to float your rate. That means that although you lock in the rate when you make an application, the lender will adjust the rate to any lower interest rate that occurs while your application is being processed. Of course, if rates rise, in most cases the rate will "float" upward with them. Since points also typically fall with interest rates, some lenders also allow points to rise and fall during the application process.
Conducting research on the market and observing mortgage trends is a good way to make sure you can lock in at the best possible rate.