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Locking Rates

The interest rate market is dynamic, and subject to movements without advance notice. Locking a rate protects you from the time that your lock is confirmed to the day that your lock period expires.

Definition Of Locks

A lock is an agreement by the borrower and by the lender and specifies a number of days for which a loan's interest rate and points will be guaranteed by the lender. Should interest rates rise and you have met all of your conditions, the lender is obligated to honor the rate that they have locked on your behalf. Should interest rates decrease, the lock must still be honored by the borrower.

Lock Fees

At times and under certain circumstances lenders may not charge a fee for locking in your loan. Sometimes, if you have a loan in process and you have returned your signed package to the lender, they will lock your rate with no upfront fees. However, in most cases if the closing of the loan is more than 15 or 30 days into the future, the lender will charge a fee. The amount of the fee will depend on the rate being locked, versus the currently quoted rate, and expectations of the money market changes in the near future.

Lock Period

Lenders will generally quote 30, 45 and 60 day lock in periods. This means that your loan must fund within this number of days from the day that your lock is accepted by the lender.

Lock Confirmation

Until the lender confirms that your rate lock has been accepted, by our lender, your loan is not locked in. Unfortunately, the lock process is not yet automated within the mortgage industry therefore the lender must often follow the lock guidelines of it's lending sources. For this reason, lenders are sometimes not able to verify your lock request immediately but will usually do so within 24 to 48 hours of your lock request.

Lock Changes

Lenders do not renegotiate locks. Usually their policies mandate delivery of all locked loans due to the costs associated with lock fallout. It is advisable that you carefully consider the timing of your lock and unless you are certain as to your willingness to close on a quoted rate, that you watch the market for several days prior to requesting your lock. In event that the loan fails to close, the lock agreement with the lender will specify forfeiture of any up front fees that have been agreed upon, or previously paid.

Hal Schupp, CRS, GRI, Designated Broker for Vail Realty, has been a Tucson, Arizona, Licensed Real Estate Broker since 1987 and has created 100s and 100s of sales of Tucson properties.