When Can You Lock in a Mortgage Rate?

Have you ever wondered when you should lock in a mortgage rate?

Choosing the right time can save you money and protect you from rising interest rates. Locking a rate sets your loan’s interest rate for a given period, giving you certainty while your mortgage moves through approval and closing.

And knowing your options can help you make better choices about timing and costs.

What Does It Mean to Lock in a Mortgage Rate?

Locking in a mortgage rate means your mortgage lender guarantees the interest rate on your loan for a specific period.

Once locked in, your rate will not change, no matter what, even when the market rates go up.

Things to keep in mind:

• The lock applies to a specific loan amount and type.
• Lock periods usually range from 30 to 90 days, sometimes longer.
• Some lenders charge a fee for locking for longer periods or special lock options.
• A locked rate does not include other costs like closing fees or other points unless specified.

This option gives you predictability. You know what your monthly payment will be while everything else stays the same.

So How and When Can You Lock in a Mortgage Rate?

You can usually lock your rate after your mortgage application is approvedbut before closing.

4 steps to lock a mortgage rate:

1. Submit your mortgage application with income, credit, and asset documentation.
2. Get pre-approved to confirm your eligibility and loan amount.
3. Ask your lender about current lock options and any fees.
4. Decide whether to lock immediately or float while monitoring rates.

Types of locks:

• Early lock:This lets you lock before your appraisal or underwriting is complete. This is useful if rates are trending up.
• Standard lock:This lets you lock closer to closing after your loan passes underwriting. This is actually the default choice.

How Long Can You Lock in a Mortgage Rate?

A lock period really depends on lender policies and your loan type.

But this is how it usually works

Longer lock periods give more time but may cost extra. Shorter locks save money but require faster processing.

The Option to Float Your Mortgage Rate

There is another option besides locking in.

Locking in gives you certainty but you also have the option to float your rate.

Floating your mortgage rate means you do not lock it and your interest rate can go up or down until closing.

Floating can be attractive if you expect rates to fall but it also has risks because even small rate increases can affect your monthly payment and total loan cost.

Some lenders even offer a float-down option.

Wait, Back Up. What is a Mortgage Rate Float-Down?

A float-down option is a middle ground between locking and floating.

It allows you to lock your rate but still take advantage of a lower rate if market rates drop.

Things to keep in mind about this option:

• Usually allowed once during the lock period.
• Often requires a fee, but it can be worth it if rates drop significantly.
• Can help protect against rising rates while still giving flexibility.

This option is useful if you want certainty but also want a chance to save if the market moves in your favor. So ask your lender about availability and fees when you're thinking about going for a float-down.

So Should I Float, Float-Down, or Lock My Mortgage Rate?

Deciding between floating and locking depends on your priorities and risk tolerance.

Here's a quick look at their differences so you can easily see and know what to go for:

Things you should consider when deciding what option to go for:

• Locking is safer if you want certainty and are worried about rates rising.
• Floating may save money if rates drop, but it exposes you to potential increases.
• Float-down options offer some flexibility but may include fees.
• Timeline matters: Longer closings may benefit from locking to avoid unexpected changes.

It still goes back to asking your lender about the current trends and any tools that they offer to reduce risk while floating. Knowing your options helps you choose an option that fits your budget best.

Let's Bring It All Together

Knowing when to lock in a mortgage rate can make a big difference in your home purchase.

Locking in gives certainty and predictability and floating offers potential savings with some risk. By fully knowing your options, timelines, and market conditions, you can make a choice that works for your budget and homebuying plan.

So it's important that you talk with your lender early to discuss lock periods, fees, and float-down options so you can decide early and with confidence.

FAQs about Locking in a Mortgage Rate

How early can you lock in a new mortgage rate?

You can usually lock in a mortgage rate once your loan application is submitted and you’ve provided key documents like income and credit information. Some lenders allow you to lock in as soon as you’re pre-approved, while others wait until you’ve found a property. It depends on the lender’s policy and the type of loan.

What happens if I lock in a mortgage rate and the rate goes down?

If market rates drop after you have locked in, your rate won’t automatically adjust. But some lenders offer the float-down option, which again lets you lower your rate once during the lock period usually for a fee. If your lender doesn’t offer that, you’ll stay at your locked rate.

How far in advance can you lock in?

Most lenders let you lock in a rate for 30 to 60 days, but some allow extended locks of 90 days or more. Extended locks are more common for new construction or longer closings and they may come with an extra cost.

What is the 3/7/3 rule for mortgage?

The 3/7/3 rule refers to key timing requirements in mortgage disclosures under the Truth in Lending Act (TILA):

• Lenders must provide initial disclosures within 3 business days of receiving your application.
• The loan cannot close until 7 business days after those disclosures are delivered.
• If there are changes to the APR, lenders must provide a corrected disclosure at least 3 business days before closing.

Will mortgage rates ever be 3% again?

No one can really predict what can happen next and that includes mortgage rates.

Rates move based on inflation, economic growth, and Federal Reserve policy. While 3% rates were possible during specific economic conditions especially during 2020 and 2021, most experts believe those rates were unusually low. It’s best to base your decision on your personal budget and timing rather than waiting for rates to reach that level again.

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