Mortgage Lock-Ins

When you’re looking for a mortgage, you’re likely to shop among lenders for the most favorable interest rate, and the lowest points and other up-front charges. When you find the most favorable terms and the lender that you want, you’ll apply to that lender.

What is a Lock-In?

A lock-in, also called a rate-lock or rate commitment, is a lender’s promise to hold a certain interest rate and a certain number of points for you, usually for a specified period of time, while your loan application is processed.

Depending upon the lender, you may be able to lock in your interest rate and points when:

• you file your application;
• during processing of the loan;
• when the loan is approved;
• or later.

Will Your Lock-In Be in Writing?

It is wise to obtain written, rather than verbal, lock-in agreements to:

• fully understand how your lender’s lock-ins work; and
• have a tangible record of your arrangements with the lender in the event of a dispute.

Will You Be Charged for a Lock-In?

Lenders may charge you a lock-in fee that may or may not be refundable if you do not close your loan. The amount of the fee and how it is charged will vary among lenders and may depend upon the length of the lock-in period.

How Long Are Lock-Ins Valid?

Lock-ins of 30 to 60 days are common but lock-in time periods may range from 7 to 120 days. Usually, the longer the period, the greater the fee.

Before deciding on the length of your lock-in:

• ask your lender to estimate (in writing, if possible) the time needed to process your loan;
• factor in any delays that might impact settlement (construction issues, etc.); and
• ask for a lock-in with as few contingencies as possible.

What Happens if the Lock-In Period Expires?

If your lock-in period expires, you might lose the interest rate and the number of points you had locked in. Most lenders will then offer the loan based on the prevailing interest rate and points, which may now be higher due to market conditions.

Questions to ask your lender about lock-ins.

This information is adapted from "A Consumer’s Guide to Mortgage Lock-Ins" published by the Federal Reserve Board and the Office of Thrift Supervision.