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What's a lock-in or a rate lock?

A rate lock or lock-in agreement is a written agreement that guarantees you a specific interest rate on your mortgage loan, as long as there are no major changes in your loan application and the loan closes within the agreed upon timeframe. This timeframe, which is usually 30-60 days,  is  referred to as the Rate Lock Period.

The rate lock or lock-in agreement should include:

  • The interest rate that you have agreed upon with your lender;
  • The number of points to be paid, if any; and
  • The length of the lock-in period.

A rate-lock is used to confirm your interest rate, discount points and actual loan payment. Once your interest rate is locked, the rate should remain the same through closing – for the most part. There are two important exceptions:

  1. If you don’t close on your loan before the rate-lock expires, your rate is no longer guaranteed and therefore can change.
  2. If your rate-lock is conditional on certain factors that are not yet finalized (like an appraisal), your rate could still change even though it is locked.

With a conditional rate-lock agreement, the lender is allowed to adjust the rate if circumstances change, like when:

  • An appraisal shows the value of the home is different than expected.
  • The income documents you give your lender show your income is different than expected.
  • The debt documents you give your lender show that your required debt payments are different than expected.

Some lenders may not offer conditional rate lock agreements. They may require that an appraisal is completed or that you submit proof of income, debts, or other important information before they will offer you a rate-lock.

Tip: You should make sure your rate lock agreement is long enough to cover the time until you close on your loan. If you are concerned that your rate lock period might be too short, ask your lender about switching to a longer rate-lock period now.

Warning: Your Good Faith Estimate is not the same as a rate lock agreement. Although there might be a rate lock period listed in the “Important Dates” section of your GFE, your rate is not locked until you and your lender agree upon the lock. Usually, you will eventually sign a written agreement with your lender.

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