How to lock in a good interest rate when buying a home

Together, the housing market's low home prices and record-low mortgage rates continue to offer potential buyers high affordability. Once you have applied for a home mortgage loan, follow these tips to make sure you lock in a low interest rate.

If rates are low when your mortgage loan is approved, you will want to consider locking in the low rate. This will guarantee that you will receive a specified rate, even if the rates increase from that rate by the time you hit the closing table. Work with your REALTOR® to ask for a lock that will not expire until after your expected closing date.

Additionally, you and your REALTOR should ask for a written copy of the lock-in agreement with full details on what you discuss, as oral arrangement can be subject to change over time. Some lenders may charge a fee for the lock-in service, so ask about the details and all fees related to the lock-in agreement, including if the fees increase for a longer lock-in period.

In the event that mortgage rates dip lower than they are currently, the source says to see if your lender will allow a float down clause in the agreement, allowing you to get the best deal. Note that there are different types of lock-in agreements, including the option to lock in the interest rate as well as the points you will pay; or to lock in a low interest rate with adjustable points that depend on the market. Ask your loan officer to describe the differences of each to you, and work with your REALTOR to determine the best fit.

Today, rates are historically low, and the need to lock in a low rate is lower than usual. However, when buying a home, it’s important to at least talk with your Realtor about locking in a low interest rate once you begin the home mortgage loan process.