Mortgage rate lock: When should you lock a mortgage rate?

What Is a Mortgage Rate Lock?

A mortgage rate lock ensures your interest rate remains fixed from the time you lock it until the lock period expires, typically through the closing date. This protects you from rate increases during the lock period, offering stability regardless of market fluctuations.

How Does a Mortgage Rate Lock Work?

A rate lock shields you from daily interest rate changes. If rates rise, your locked rate stays the same. However, if rates drop, you typically cannot access the lower rate unless your lender offers a float-down option, which allows you to benefit from a rate decrease for a fee.

What Is a Float-Down Mortgage Rate Lock?

A float-down provision lets you secure a lower rate if market rates drop after your lock, typically within a set period post-loan approval. This feature comes with an additional cost, so weigh the benefits carefully.

Without a lock, you risk higher rates, potentially paying points (1% of the loan amount) to maintain a desired rate if available.

How Long Can You Lock a Mortgage Rate?

Standard rate locks last 30 to 60 days at no cost. Longer locks, up to 120 days, may incur an upfront fee and often have rates 0.25%–0.50% higher than short-term locks. Choose a lock period that aligns with your closing timeline.

When Should You Lock Your Mortgage Rate?

You can lock your rate between loan application and approval. Consult your loan officer to assess rate trends:

• If rates are trending downward, consider floating the rate to potentially secure a lower one.
• If rates are rising, lock in early to avoid higher costs.

For example, a 30-day lock on a 30-year fixed mortgage might offer a 6.25% rate with no points, while a 60-day lock could cost 1 point or a slightly higher rate. Monitor recent rate trends (e.g., past 60 days) to inform your decision.

Can You Extend a Rate Lock?

Lenders may extend a rate lock for a fee, which could be covered by the seller if delays are their responsibility. Discuss extension policies with your lender.

How to Lock in a Mortgage Rate

Most lenders allow rate locks after loan pre-approval and a signed purchase contract. Locking before underwriting is ideal, as approval depends on the locked rate. Contact your lender to review their rate lock policies, available lock periods, and associated fees.

Mortgage Rate Lock Fees

Rate locks may involve two fees:

• Upfront fee: For long-term locks (e.g., 120 days), paid in advance.
• Rate extension fee: A percentage of the loan, included as a closing cost on the Loan Estimate or Closing Disclosure.

Should You Lock Your Mortgage Rate?

Consider locking your rate if it’s competitive and rates may rise soon. A rate lock offers certainty in a volatile market. However, ensure your finances are ready, including funds for any lock-related fees.

Questions to Ask Your Lender

Understand your lender’s rate lock policies to avoid issues, such as a voided lock due to changes in your credit score or debt-to-income ratio. Key questions include:

• Will the locked rate change under specific circumstances?
• Is the rate locked through the closing date?

Preparing Financially for a Mortgage

Before locking a rate, ensure your finances are ready. This includes having funds for potential rate lock fees and maintaining stable credit and debt levels to avoid issues during underwriting.

Ready to Lock Your Rate?

Since 1997, Metropolitan Mortgage has helped homebuyers in Overland Park, Kansas City, and the Midwest, including Kansas and Missouri, secure the right mortgage. As a family-run business, we offer various mortgage programs to make homeownership a reality. Contact us today to discuss your mortgage options.

Current Mortgage Rates

Check today’s mortgage rates in Missouri and Kansas to stay informed.