Rate Lock Fees
When getting a home mortgage, at some point along the way in the loan process, you have to "lock in" your interest rate. Locking in guarantees the rate you're locked at. If the market gets worse and average rates go higher, if you're locked in, you're protected. Typically, if the market improves slightly and rates come down some, you're still locked into the locked rate. If the market moves a lot, and rates come down substantially, most lenders will offer the opportunity to reduce your rate, or at least meet you half way with what's called a "float down". Every lender has different policies with regard to float downs.
Rate locks come with a fee - it may not be an up front fee, but the cost for a lock is built into loan pricing. For example, locking a rate for 75 days may come with a small fee or slightly higher rate than locking a rate for 30 days. You can see additional fees if your rate lock "expires". It's important to try to wrap up your loan within the allotted time of a rate lock, because it results in the best pricing for a borrower, and a good loan officer should be able to offer great advice on when to lock and when to "float", the alternative where a loan application is processed without locking in.
In markets where rates are improving, sometimes floating the rate makes sense, but the market can be volatile and move quickly, so it's a gamble to float your interest rate throughout the entire loan process.
One important aspect of rate locks, fees, and the loan process is potential delays. Lenders will generally try to work with customers who have a rate lock expire due to no fault of their own - builder delays, property damage, illness, and many other things can cause a loan process to go longer than anticipated due to no fault of a borrower or a lender. In these cases, lenders can be pretty understanding! However, if the delays are borrower-related - you took a vacation during the loan process and were unreachable for weeks, you didn't send in requested documents in a timely fashion, or any other delay is caused by a borrower that could have been avoided, there will likely be fees associated with extending a rate lock.
When a rate lock expires, most lenders will have a "worst case pricing" policy - if the market has improved, the lender may reinstate the old rate lock terms. If the market has worsened, the customer may end up with worse pricing than they originally locked in. This dissuades borrowers from intentionally letting rate locks expire (remember, most lenders have float down policies to help if the market improves!), because locking a rate puts the lender on the hook to deliver the loan to an investor, and locking comes with a cost to a lender!
With just about any mortgage loan, there will come a time to lock in the interest rate, so it's important to know what that entails, what the options are, and to be sure to lock in a rate that covers the time it will take to process a mortgage loan start to finish. And perhaps the most important part of locking - work with a competent professional that understands the markets, the loan products, and can lock you into a loan with the best terms for your specific situation.