When shopping for a mortgage, the lender may give you a quote for the mortgage interest rate and points (additional fees charged by the lender usually paid at closing by the borrower). These only represent terms available at the time of the quote. They may not be available by the closing date (which may be weeks or months in the future). To ensure the rate and points are the same at closing as they are when quoted, you'll need to lock in the interest rate (also known as a rate lock or rate commitment).

Obtain a Written Agreement

Most lenders will commit, in writing, to a mortgage interest rate for a specified time period while your loan application is processed - this is known as "locking in" the rate.

If you elect to lock in an interest rate, it is best to deal with a lender who provides a written lock in agreement. Be sure to read this agreement carefully, some lock in agreements become void due to actions beyond your control - such as a change in the maximum rate for VA-guaranteed loans.

Lock in Options

The following lock in options are common among lending institutions. Be sure to ask the mortgage lenders you are considering which lock in options they offer.

• Lock in interest rates and points.
  This will give you a clear understanding of how much your mortgage will cost. Neither your interest rate nor points increase during the lock in period. This protects you against rising market conditions.

• Lock in interest rates and floating points.
  Your interest rate is locked in and will not change for the lock in period, while your points may rise and fall with market conditions. With this option, your lender may allow you to lock in the points at the current market condition some time between submitting the loan application and closing.

• Floating interest rates and floating points.
  This gives you the option to lock in the interest rate at some time between submitting the loan application and closing. This puts you at risk if interest rates and points rise and may not be best for a home buyer with a tight budget.

The Cost of Locking in the Rate

It is not unusual for a lender to charge a fee for locking in an interest rate and points. This fee may vary depending on the amount of time you want to lock in the rate (the lock in period).

The fee may be charged when you lock in the rate (and is rarely refundable if you withdraw your application, if your credit is denied or if you do not close on the loan) or it may be included in your closing costs. The amount of the fee and when it is charged will vary among lenders.

The Lock in Period

Most lenders will offer lock in periods of 30-60 days. Some lenders may only have short lock in periods. And still others may offer a longer lock in period (expect higher fees for longer lock in periods).

The lock in period should be long enough for the loan approval process and to allow for any other contingencies that may delay closing.

The Lock in Expiration Date

If unexpected circumstances prevent the loan from settling prior to the last day of the lock in period (whether caused by you or others in the process - including the lender), you lose the interest rate and points that were locked. Prevailing interest rates and points are usually charged under these circumstances. Be sure to ask your lender before you lock in what interest rates and points will be charged if the loan is not closed before the lock in period expires.