Mortgage Interest Rate Lock-Ins


Length of Rate Lock Period

Usually the lender will promise to hold a certain interest rate and number of points for a given number of days, and to get these terms you must settle on the loan within that time period. Rate lock lengths of 30 to 60 days are common. Some lenders may offer rate locks for shorter periods of time (such as for 7 days after your loan is approved), while others may offer longer rate locks of up to 120 days. Lenders that charge rate lock fees generally charge higher fees for longer lock-in periods.

The length of your lock-in period should be long enough to allow for settlement, and any other contingencies imposed by the lender, before the lock-in expires. Before establishing the length of your lock-in, you should find out the average time it takes to process loans in your area and ask your lender to estimate (in writing, if possible) the time needed to process your loan. You should also take into account any factors that might delay your settlement, such as possible delays involved with providing information about your financial condition and unanticipated construction delays (if you are purchasing a new home). Finally, ask for a lock-in with as few contingencies as possible.

Get It in Writing

It is wise to obtain written rate lock agreements rather than verbal ones that can be difficult to prove in the event of a dispute. Make sure that you fully understand your lender's rate locks and loan commitments. Some lender rate lock forms may contain important information that is in fine print or that is difficult to understand. For example, some rate lock agreements may become void through some unrelated action such as a change in the maximum rate for Veterans Administration guaranteed loans. If possible, try to obtain a copy of a lender's rate lock form to read carefully or show to a lawyer or real estate professional before you apply for a loan.

Expiration - Expired Rate Lock

If you do not settle within the lock-in period, you may lose the interest rate and the number of points you had locked in, regardless of whether the delay in processing was caused by you, others involved in the settlement process, or the lender. The lender has to wait for documents not only from you but from others such as employers, appraisers, termite inspectors, builders, and individuals selling the home. On occasion, lenders themselves are the cause of processing delays, particularly when loan demand is heavy.

If your lock-in expires, most lenders will offer the loan based on the current interest rate and points. If market conditions have caused interest rates to rise, most lenders will charge you more for your loan. One reason why some lenders may be unable to offer the lock-in rate after expiration is that they can no longer sell the loan to investors at the lock-in rate. When lenders lock in loan terms for borrowers, they often have an agreement with investors to buy these loans based on the lock-in terms. That agreement may expire around the same time that the lock-in expires and the lender may be unable to afford to offer the same terms if market rates have increased. Lenders who intend to keep the loans they make may have more flexibility in those cases where settlement is not reached before lock-in expiration.

Accelerating Loan Approval

By helping to keep the loan process moving, you can lessen the chance that your rate lock will run out before settlement. While the lender has the greatest role in how fast your loan application is processed, there are certain things you can do to speed up its approval. Try to find out what documentation the lender will require from you.

Much of the information required by your lender can be brought with you when you apply for a loan. This may help to get your application moving more quickly through the process. When you first meet with your lender, be sure to bring the following documents:

  • The purchase contract for the house (if you do not have the contract, check with your real estate agent or the seller)
  • Your bank account numbers, the address of your bank branch and your latest bank statement, plus pay stubs, W-2 forms, or other proof of employment and salary, to help the lender check your finances
  • If you are self-employed, balance sheets, tax returns for 2-3 previous years, and other information about your business
  • Information about debts, including loan and credit card account numbers and the names and addresses of your creditors
  • Evidence of your mortgage or rental payments, such as cancelled checks
  • Certificate of Eligibility from the Veterans Administration if you want a VA-guaranteed loan. Your lender may be able to help you obtain this

Be sure to respond promptly to your lender's requests for information while your loan is being processed. It is also a good idea to call the lender and real estate agent from time to time. By calling occasionally, you can check on the status of your application, and offer to help contact others such as employers who may need to provide documents and other information for your loan. It is helpful to keep notes when you contact your lender so that you have a record of your conversations.

Back   Next
The information provided in this website is not legal advice and should not be interpreted as legal advice. This website is intended to provide a basic understanding of this information in summary form. This information may not be comprehensive, is subject to change, and may not apply to all individual circumstances. Any information received here should be confirmed with the appropriate government agencies or with an attorney, particularly as it relates to your individual circumstances. Your use of this website indicates your agreement to be bound by our Terms of Use.