The Mortgage Process and Rate Locks, Explained

The loan process, step by step

1. Get pre-approved. A lender reviews your credit, income, and savings and tells you roughly how much you can borrow. A pre-approval letter helps when you make an offer. Learn how credit checks work first.
2. Find a home and make an offer. Once the seller accepts, you are under contract and the loan moves forward.
3. Apply for the loan. In most cases, the lender must give you a Loan Estimate within three business days of your application. It shows your rate, monthly payment, and costs, and you can use it to compare lenders. Learn how to read it.
4. Lock your rate. Your lender will tell you when you can lock. More on this below.
5. Appraisal and underwriting. An appraiser values the home, and an underwriter verifies your information. You may be asked for more documents, so respond quickly.
6. Review your Closing Disclosure. You must receive it at least three business days before closing. Compare it with your Loan Estimate.
7. Final walk-through and closing. You check the home, sign the loan documents, and pay your closing costs, and the home is yours.

What is a rate lock?

Mortgage rates change often, sometimes more than once a day. A rate lock is your lender's commitment to hold a specific interest rate, and the points or credits tied to it, for a set period while your loan is processed. If market rates rise during that time, your rate stays the same. If they fall, your locked rate usually does not drop unless your lock includes a float-down option.

How long does a lock last?

Common lock periods are 30, 45, and 60 days. Choose one that covers your expected closing date with a little room to spare. Shorter locks are often free or cheaper, and longer locks may cost more, either through a fee or a slightly higher rate. Ask your lender how their pricing works.

When should I lock?

Many lenders let you lock once you have a home under contract and have applied for the loan, and some allow it earlier. Nobody can predict where rates will go, so it is a trade-off. Locking protects you if rates rise. Waiting lets you benefit if rates fall, but leaves you exposed if they rise. A useful question to ask yourself is how much of a rate increase your budget could handle. If a higher payment would be a problem, locking sooner may give you peace of mind. Ask your lender about their lock policy and any cost.

What if my lock expires before closing?

If closing is delayed past your lock date, you may need to pay for an extension, or the lender may price your loan at the current market rate. Delays often come from missing paperwork, appraisal issues, or repairs. To protect yourself, respond to requests promptly and ask your lender in advance what an extension would cost.

What is a float-down?

A float-down is an option that lets you take a lower rate if rates fall after you lock. Not every lender offers one, it often costs a fee, and it usually has conditions, such as rates needing to drop by a minimum amount. Ask for the terms in writing.

What a lock does and does not cover

• It holds the rate and pricing for a specific loan: the loan program, amount, term, and property.
• If you change those details, or your credit or finances change significantly, your pricing can change.
• It does not guarantee that your loan will be approved.

What affects the rate you are offered

Rates depend on the market and on your situation: your credit score, down payment, loan type and term, property type, and whether you pay discount points. A discount point is an upfront fee, equal to 1% of the loan amount, that you can pay to lower your rate. Whether points make sense depends partly on how long you plan to keep the loan; see what discount points are and how they work. For a rough idea of the rate you might be offered, try the mortgage rate estimator.

Comparing lenders fairly

To compare offers, get Loan Estimates on the same day for the same loan type, amount, and lock period, and compare both the rate and the costs. A lower rate with higher fees is not always cheaper. Your Loan Estimate also shows whether your rate is locked. To see which of two offers costs less over time, try the Loan Estimate comparison tool.

Questions to ask your lender

• When can I lock my rate, and is there a cost?
• How long is the lock, and what happens if closing is delayed?
• Do you offer a float-down, and what are the terms?
• What would change my rate or costs after I lock?
• Is the rate you quoted me locked, or can it still change?