Rate Lock Explained
A rate lock is an agreement between the lender and the borrower. The lender agrees to "lock" the rate at the current market in order to protect the borrower from interest rate movements. In consideration of the lender's action, the borrower agrees to proceed in good faith toward the closing of his or her loan.
A rate lock is issued for a fixed number of days - usually 30, 45, or 60 days. The longer the duration, the higher the points. For example, a lender might add 1/8 of a loan point for a 45 or 60 day lock. It is important that the term of the rate lock is sufficient to allow for the closing of the loan. Most refinance transactions can be concluded within a 30 day time frame, whereas most purchase transactions require 45 to 60 days.
When to Lock a Rate
Most loan applicants can have their rate locked in when the loan application is submitted in its entirety. This means after the lender or mortgage broker is in receipt of the Uniform Residential Loan Application, a lender/broker generated credit report, and various loan disclosures. Please call or email if you wish to lock in immediately upon submitting an application.
Many applicants choose to delay the lock decision until rates meet their desired target.
How to Lock a Rate
Once we have reviewed your application and your credit (this is important we need your signed authorization and application to review your credit), you will be notified that you are free to lock.
If you decide to lock the rate, this must be communicated by using the "Click to Lock" link located on the same web page as the daily mortgage rate table. It is critical that this is done between 10:00 AM and 5:00 PM, as the mortgage market observes a daily market "window".
Setting a Rate Target
If your loan application is in a position to lock, and you have a specific target in mind, we can lock your rate when rates strike your target. If pursuing this strategy, please communicate your target to us in the clearest possible terms.
Per the delivery contracts we have with lenders and investors, we cannot re-negotiate a lower rate with the bank after you have locked in your rate unless rates have moved down sharply. Thus, it is important that you give your rate lock decision careful consideration.
There is no fee to lock in a rate. However, some lenders and/or brokers will impose a lock-change fee if you lock in your rate and decide not to pursue the loan, or pursue a re-locked loan. Discuss this carefully with your mortgage representative if you are unsure of your commitment to proceed with the transaction.
We will endeavor to lock your loan rate as quickly as possible, but will not be held responsible for market changes that may occur between the time your lock is requested and the time the lender/investor confirms your request. The mortgage market can be volatile at times, and thus not all lock requests are met.
Once we have been able to confirm your lock with the lender or investor, you will be notified in writing (usually by email). We are usually able to confirm your rate by the end of the business day.