A rate lock is a guarantee from your lender to give you a certain interest rate so long as your mortgage closes within a certain period of time. This is especially important to have when you are buying a home, because the last thing you want to worry about is day-to-day fluctuations in your interest rate with everything else that is going on at that time. Here are some pointers to keep in mind when locking in your rate.
- How long is my rate locked? Rate locks come in many varieties, from the 15-day lock, normally used when your loan is committed, to the super-long 360 day rate locks available for new construction homes. You should choose a rate lock that is long enough to guarantee your rate through your closing date, but remember that longer locks mean higher rates, and sometimes upfront fees.
- How much does my lock cost? There are two ways your rate lock can cost you. Some lenders charge upfront fees for any rate lock, others charge fees only for rate locks longer than 60 days. Your lock can also cost you in your interest rate -- a 30-day lock might offer a rate at 6.5%, while a 60-day lock for the same loan means you'll pay 6.75%.
- Am I obligated to use my locked rate? Certain types of rate locks, often called mandatory locks, will require you to use that lock and that lender or pay substantial fees. Make sure you know if you must use your lock, or if you can get out of it.
- Can my lock be extended? Most, but not all, rate locks offer the ability to extend the lock in period for a fee. If you are unsure of your closing date, make sure you know if you can get an extension.
- Does my rate lock apply to just one home? In most cases a rate lock requires the lender to have your name, social security number, and the address of the home you are purchasing. There are some that will allow you to lock your rate prior to finding the right home.
By asking these questions, you should be able to get the most out of your rate lock. The most important advice I can give you is to ask questions. What you don't know can hurt. What you do know can only help you.
;)
Links;)
Tags (Tag Cloud);)
Archives
Posted by 
great points on Locks dan. I think a lot of people don't really understand them and how they work. I'm glad you touched on them.