Compare Mortgage Rates Quotes

SecureRights Policy

National Mortgage Rates 25 May 2012

Loan Type Today +/- Last Week
15 yr fixed 3.03 2.87
30 yr fixed 3.72 3.50
5/1 ARM 2.75 2.50

Rates may contain points

Rate Locks and How They Work

By:
Kirk Haverkamp | January 07, 2012

Mortgage rates remain at historic lows for the time being, but they could start creeping up at any time. So if you’re planning to take out any kind of a mortgage loan anytime soon, you’ll want to get a rate lock.

What are mortgage rate locks and how do they work? Basically, they’re a written promise by a lender to offer a certain interest rate for a specific length of time, usually 30 to 60 days. So if the lender is currently offering 30-year fixed-rate refinancing at 3.95 percent, a 30-day rate lock would guarantee that rate will be available for the next 30 days.
 

Guarantees interest rate, certain terms

 
The rate lock doesn’t just guarantee the interest rate, but also specifies other aspects of the loan that affect it. For example, the lock may also specify the rate is for a loan with no more than an 80 percent loan-to-value ratio (or at least 20 percent down on a home purchase mortgage) and includes one discount point. (Discount points are a form of prepaid mortgage interest that can be used to buy a lower mortgage rate. Each costs one percent of the loan amount, so buying two discount points on a $250,000 mortgage would cost $2,500).
 
Locking in a rate doesn’t commit you to taking out a mortgage with that particular lender. It simply guarantees that rate if you do take out a loan within the time frame given. Similarly, a lender providing you with a rate lock is no guarantee they’ll approve your loan application – you still have to go through the application process and be approved.
 

When to seek a rate lock

 
Most borrowers seek a rate lock either at the time they submit a mortgage application or when they are just about ready to do so. Because the mortgage approval process can take several weeks or longer (particularly if a home purchase is involved), you don’t want to wait too long after securing your lock to get the application process going.
 
You may want to obtain a rate lock from a lender you’re interested in without submitting an application if they’re offering what appears to be a good rate and terms, but you still want to shop around with a few more lenders before committing yourself. However, this should be something you do at the very end of the mortgage-shopping process – you don’t want to delay more than a day or two after locking your rate to submit your application.
 
Lenders will often charge for a rate lock, particularly if they don’t have a signed application in hand. Some may charge a fee up front, while others will simply add the fee onto the closing costs when the loan is approved and finalized.
 

How long to lock in?

 
You’re more likely to pay for a rate lock – or pay more – if you’re seeking a longer lock, such as for 45 or 60 days instead of 30. This is because there’s a greater risk to the lender that underlying interest rates will rise over the longer period.
 
These days, it’s not a bad idea to pay a bit extra for the longer rate lock, particularly if you’re buying a home. With lenders being more particular about qualifying borrowers for mortgages, and applying more exacting standards on home appraisals, it can take well over a month to get a mortgage approved and closed in some cases.
 

When will rates rise?

 
And while rates have been remarkably stable near record lows in recent months, that can only last for so long. In particular, a small increase resulting from the recent fee increase on Fannie Mae, Freddie Mac and FHA home loans enacted to defray the cost of extending the Social Security temporary tax cut is expected to kick in around late January or early February.
 
Of course, there’s always the possibility that mortgage interest rates could decline while your rate lock is in place. In that case, you may want to see if you can negotiate a reduced rate with your lender, or otherwise start the process all over again. Remember that  if you paid for your lock up front and don’t follow through on the application, you’ll be out that money, so make sure the new rate is low enough to make it worth the time and money of starting all over again.
 
 
 

Start here to compare refinance rates from top lenders in our network

Low Mortgage rates is our mission

Bringing the best rates on the market to
you is our primary focus. Fill the form to get a quote based on your conditions.
/Mortgageloan.com

SecureRights Policy

  • New Home

    Looking to get on the property ladder? Discover your spending power. Get a rate quote today.

  • Debt Consolidation

    Are your debt woes getting you down? Explore your options now by filling out our form.

  • Home Equity

    Is fluctuating home value a constant cause for concern? Our advice - take out a new loan today.

  • Mortgage Calculators

    Need help getting a grip on your expenses and finances. Try one of our 137 multipurpose calculators.

Call For Rates

800-419-1494

Speak to a lender now.

We will match calls to our toll free number with our network of lenders.

See Today's Rates

National Rates

Loan Type Today +/-
30 yr fixed 3.72
15 yr fixed 3.03
5/1 ARM 2.75

Rates may contain points

Compare Rates »

Browse Mortgage Rates

Mortgage Rates Calculators