One thing that can impact the affordability of a home purchase is your mortgage rate. Minor changes to the rate on your mortgage can make the homes you were looking for suddenly unaffordable. Here’s how mortgage rate locks work and why you should consider them when shopping for a home. 

What is a Mortgage Rate Lock?

Also known as rate protection, a mortgage rate lock prevents your interest rate from rising before you can close on your home. A rate lock allows you to take advantage of the agreed-upon rate with your mortgage company. If interest rates go up, you get to keep your mortgage at the lower rate. 

Why Should You Get a Mortgage Rate Lock?

Most buyers prefer to get their mortgage rate locked in for peace of mind. If you’re satisfied with your rate when you get pre-approval from the lender, it’s generally a wise choice to lock in the rate at that point. The last thing you want is for rates to go up over the next 30-60 days and make your dream home suddenly unaffordable. 

Some lenders charge a small fee for locking in a mortgage rate, which you can add to your closing costs or pay upfront. Others might lock in the rate for free, depending on the type of mortgage and lender you choose. 

How Long Do Mortgage Rate Locks Last?

Rate locks are only valid for a specified period. The lock period varies depending on the loan type, its terms, your location, and the particular lender you are working with. However, most lenders will lock in a rate for up to 60 days. If the period expires and you haven’t closed yet, you may get the option to extend or will need to renegotiate based on the current rates.

Things That Can Change Your Locked-In Rate

While rate locks are an excellent tool, it’s important to understand that they aren’t bullet-proof protection. In most cases, there are clauses that allow the lender to change your locked-in rate. Some typical reasons include:

  • Property appraisal — If the appraised value of the home isn’t what was anticipated, the rate may need to be adjusted. 
  • Loan documentation — Any delays in providing the required loan documentation could alter your current rate. 
  • Loan details — Changes in the loan details, such as the amount or term, could impact the rate. 
  • Credit score — If your credit score changes significantly, this could lead the lender to re-evaluate your locked rate. 

The Lafayette Team —Your Trusted Real Estate Partner in Lexington, SC

Even if you understand how mortgage rate locks work, you’ll want to team up with someone you can trust to help you achieve your real estate goals. The Lafayette Team with EXP Realty wants to be your trusted partner in Lexington, Lake Murray, and the surrounding area of the South Carolina Midlands. 

With over 34 years of combined experience helping first-time, lakefront, active-adult, new construction, and other clients throughout the region, you can have peace of mind knowing you will get the buying or selling experience you deserve. Contact us today to learn more about how our team can help you explore homes and financing options that meet your needs and budget.