Mortgage rates have a high volatility, meaning they change frequently and unpredictably. For homebuyers this unpredictability can be troublesome. The solution for homebuyers who are worried about rates increasing before closing is a “mortgage rate lock.”
A mortgage rate lock stops an interest rate on a mortgage from changing for a certain amount of time. This allows the homebuyer not to worry about rates going up during the time they are submitting an offer all the way to closing on their house.
Before you lock in a rate you should ensure that you are financially prepared to apply for a mortgage. Some questions you should ask your self are: what my monthly budget allows for me to spend on monthly mortgage payments, does my credit score meet requirements to prequalify, and have I looked for homes in my budget.
It is important to lock your rate at the right time so be sure to communicate with your loan officer. You are not able to lock in a rate until after your loan has been approved. Many people wait until they have established which home they want to purchase before locking in their rate. When you are locking in your rate make sure that the length of the lock is long enough to cover the entire homebuying process because extensions may cost you fees.