Lock Agreements Are Back in Vogue to Protect Against Higher Rates

While federal guidelines dictate that lenders must lock in a borrower’s interest rate about three days before going to settlement, the recent escalation in mortgage costs is making rate locks popular again. Experts, noting that rates fluctuate several times each day, advise home buyers not to focus too heavily on the exact right moment to lock on the lowest rate. “If the rate looks good, if it meets your goals and meets your needs, lock it in,” recommends Ellen Davis of Corridor Mortgage in Columbia, Md. The lock-in agreement will protect the borrower from higher rates for 30 to 60 days, depending on the lender and type of loan. If the mortgage fails to close within that period, the lender may extend the lock at no cost if it is at fault for the delay; charge a fee to draw out the lock period if the borrowers are at fault; or refund the lock fee — if one was charged — in the event that the loan is not approved by underwriters. Many lenders do not charge a fee for a basic lock; but others expect a few hundred dollars or a small percent of the mortgage amount, especially on longer locks or smaller loans. | Read More