Locking in your mortgage rate is when the lender backing your mortgage secures the money for your loan at a specific interest rate, term length, and dollar amount. A typical rate lock period is for thirty days but it is possible to lock your interest rate for more or even less time. Keep in mind that the longer you lock your rate, the more it will cost you when all is said and done with your loan.
The process of mortgage rate locking starts between you and your mortgage broker or loan officer. When you choose to lock in your mortgage rate the broker or loan officer contacts the wholesale lender to lock the rate. If you are dealing with a loan officer from Wells Fargo bank for example, they will lock the rate with Wells Fargo Mortgage. If you are working with a mortgage broker they will lock with the wholesale lender they are arranging your loan with. That wholesale lender will then secure money for your loan from the secondary mortgage market.
Keep in mind that even though you’ve locked your mortgage rate and the lender has reserved funds for the loan you are not yet obligated to take out this loan. (See your three day rescission rights for more on this)
Once the wholesale lender confirms your loan from the secondary mortgage market, a written lock confirmation is issued by the lender and sent to your mortgage broker or loan officer. This rate lock shows everything about your loan including any Yield Spread Premium or commission being paid to the broker for marking up your mortgage rate. If you do not receive written confirmation of your rate lock then you have not locked your mortgage rate. Verbal rate locks are meaningless and could cost you a higher rate on your loan.
You can learn more about locking in your mortgage rate and other tips to avoid paying too much for your next mortgage by registering for the free video tutorial on this site.
My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
