What Is a Mortgage Rate Lock, and When Should I Lock My Rate?

Mortgage rates can move every day. The Consumer Financial Protection Bureau (CFPB) explains that a rate lock means your interest rate won't change between the offer and closing, as long as you close within the specified time and there are no changes to your application.

I'm Jeanette Nelson, a REALTOR® with Jeanette Nelson Real Estate, Keller Williams Realty, serving Orange County, Huntington Beach, Costa Mesa, Fountain Valley, and surrounding areas. I want my first-time buyers to understand their lock before they open escrow, because the lock date and the closing date need to work together.

This is general information. Lock policies vary by lender, so your lender is the right person to advise you on your loan.

The CFPB says locks are typically available for 30, 45 or 60 days, and sometimes longer. Lender policies vary.

The CFPB also notes something many buyers don't expect. Your Loan Estimate won't show the cost of extending a lock, what you'll pay for a specific lock period or whether a longer lock costs more. You need to ask your lender those questions directly.

Some lenders lock your rate when they issue the Loan Estimate, and some don't. The CFPB says to check page 1 of your Loan Estimate to see whether your rate is locked and for how long.

For many buyers, the natural time to talk about locking is after your offer is accepted, when you know the purchase price and the closing date in your contract. A few questions help you decide:

1. How many days are left until closing? The CFPB suggests making sure the lock period covers the time until closing.
2. Could anything delay closing? If so, the CFPB suggests asking about a longer lock now.
3. What does a longer lock cost compared with a shorter one?
4. What happens if rates fall after I lock?

No one can tell you where rates are going next. A lock gives you a known number to plan around.

A lock isn't a promise that nothing can change. The CFPB lists situations that can change your rate even after you lock:

• You change your loan type or down payment amount.
• The appraisal comes in higher or lower than expected.
• Your credit score changes, for example because of a new loan or a missed payment.
• Your lender can't document income such as overtime or a bonus.

Because a credit change can affect your rate, talk with your lender before you open new credit, take on a car loan or make a large purchase during escrow.

The CFPB names two. Extending a lock can be expensive if your transaction needs more time. And a lock can keep you from getting a lower rate if rates drop after you get your loan offer.

The CFPB suggests asking your lender, before you lock, what happens if rates fall afterward. Lender policies differ, so get the answer in writing if you can.

Your purchase contract sets your closing date. Your lock needs to last at least that long, with a little room for the unexpected.

Near the end of escrow, you'll receive your Closing Disclosure. The CFPB says you must receive it at least three business days before closing. Compare the rate on it with the rate you locked, and ask your lender about anything that changed. You can follow the full process in what happens in escrow for a first-time buyer and see your costs in what you'll pay at closing.

If you'd like help lining up your lock, your offer and your closing date, I'd love to walk through it with you. Call or text me at 714.366.8575 | DRE: 01397168, or contact me. Jeanette Nelson is a REALTOR® with Jeanette Nelson Real Estate, Keller Williams Realty, serving Orange County, Huntington Beach, Costa Mesa, Fountain Valley, and surrounding areas.