This term refers to whether your interest rate is locked in. If your interest rate is not locked in, your rate can go up or down and that is called “Floating” the interest rate. A lock is a period that the banks or financial institutions are not allowed to change the interest rate on your loan so long as all else like down payment and credit scores stay the same.
There are benefits of having a lock in. You would not need to worry about your rate rising once your rate is locked in. But, if you lock it in you can miss out on the drops in rates. If you wait to lock in your rate, you can wait for rates to go down or there is a risk of the rates going up too.
There are steps to take when you get a lock in on your interest rate. First you need to apply for the mortgage and be fully preapproved. Next your lender needs to figure out how long the loan processing will take and how long it will take for you to close. That must be done to make sure you are locked in far enough in advance to close. Then you will need to discuss with your lender if there are any fees for locking in your rate.
After, you will need to decide on how long you want your lock in on the rates. They are usually 30 to 60 days. The longer the lock term is usually the worse the rate is. The most important thing is to get everything in writing and understand exactly what you agreed to.
