What is an Interest-rate Lock?

An interest-rate lock allows you to essentially “lock in” your mortgage rate for a set period of time. Because mortgage rates can fluctuate often, this gives you time to shop around for your home once you have been prequalified for a loan, without fearing of rising rates or a hike in your potential monthly mortgage costs.

Rate locks typically last for periods of 10, 15, 30, 45 or 60 days, though some mortgage lenders offer “extended” lock programs. These will let you nail down a rate for as many as 90 days at a time. Typically, the longer a lock period is, the higher the rate will be, so keep this in mind as you go about your purchase.

Pros and Cons
As with anything, there are pros and cons to rate locks, especially in volatile markets. While on one hand, you can guarantee a low rate and give yourself a few weeks or months to find your perfect North Houston home, in some cases, the exact opposite could happen. Should mortgage rates fall during your lock period, you will still be locked-in to that original higher rate, and unless you want to pay more on your mortgage than you need to, you’ll have to wait until that lock period expires before purchasing your home.

Thus, knowing the market is key before opting for an interest-rate lock. If you know you’ll be searching for a home in the near future, study up on the market and how mortgage rates are trending. You can also speak to a loan officer or start the pre-qualification process to see what sort of rate you would qualify at the moment. Consider it an information-gathering mission. You don’t need to lock in your rate right away, but you’ll get a feel for what you’d be offered if you got a mortgage in the current conditions.

Make sure you’re ready to buy, too. While extended locks can be nice, giving you ample time to browse the market and find your dream home, they also put you at more risk than shorter lock periods. You’re the safest locking in a rate within a few weeks of your intended purchase date or, even better, once you have found a home and your offer has been accepted.