You know that when you are seeking a mortgage you should shop around for the best rate. But because interest rates fluctuate, it is a good idea to consider locking your rate. A rate lock, also called a "lock-in", is a lender's guarantee that you will get a specific interest rate and number of points if you purchase a home within a certain period of time.
If you do not complete your home purchase or refinancing agreement before the lock expires and interest rates happen to rise, you will pay the higher rate. If interest rates happen to drop during the lock period, however, you cannot take advantage of them unless you rewrite the lock and pay an additional cost.
Before locking in a rate, keep these tips in mind:
- Get your guaranteed rate lock in writing.
- Lock in as many of the costs as you can, including the interest rate and points.
- Shop around. Examine both the terms of the contract and its cost. Some lenders charge an up-front fee, while others offer the service at no cost.
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