Rate locks explained: when to lock and what can change one

What is a rate lock?

A rate lockRate lock A guarantee of your interest rate for a set period while your loan is processed, so market changes don't affect it. See the full glossary× is a lender's commitment to hold a specific interest rate, and usually a specific number of points or lender credits, for a set period while your loan is processed. As long as you close within that period and nothing material in your application changes, the rate stays the same even if market rates move.

Until you lock, your rate is floating, and it can go up or down with the market.

When can I lock my rate?

For a purchase, most lenders let you lock once you have an accepted offer and a complete application with the property address. On a refinance, you can usually lock once you've applied. Some lenders lock as part of issuing your Loan EstimateLoan Estimate A standard three-page form you receive within three business days of applying that shows your estimated rate, payment and costs. See the full glossary×, and some don't, so ask.

No one can predict where rates will go. A common approach is to lock once you know your closing date and are comfortable with the payment, rather than trying to time the market.

How long does a lock last, and what if closing slips?

Locks are commonly offered for 30, 45 or 60 days, and sometimes longer. Longer locks can cost more, so the goal is a lock that covers your closing date with a little room to spare.

If closing is delayed past the lock's expiration, you may be able to extend it, often for a fee, or the loan may be repriced at current market terms. Keeping your documents moving quickly is the best protection. In New Hampshire, title work, well and septic results and condo questionnaires are common sources of delay, so start them early.

What can change a locked rate?

A lock assumes the loan you applied for. The terms can change if any of these change:

• The loan amount or down payment
• Your credit score
• Your verified income or debts
• The property, its appraised value or its occupancy
• The loan program or term

That's one more reason to avoid new credit and large purchases before closing. The credit guide covers what to avoid.

What is a float-down?

Some lenders offer a float-down option that lets you take a lower rate if market rates drop after you lock. Availability, cost and conditions vary by lender, and many lenders don't offer one. Ask before you lock if it matters to you.

How does a lock show on my Loan Estimate?

The top of page 1 says whether your rate is locked and, if so, until what date and time. If the rate isn't locked, the rate and the costs tied to it can change. When you lock after receiving a Loan Estimate, the lender sends a revised one within three business days showing the locked terms.

The Loan Estimate guide walks through the rest of the form.