What is a Lock-in?
A lock-in, also called a rate lock or rate commitment, is a lender’s promise to hold a certain interest rate and a certain number of points for you, usually for a specified period of time, while your loan application is processed. (Points are additional charges imposed by the lender that are usually prepaid by the consumer at settlement but can sometimes be financed by adding them to the mortgage amount. One point equals one percent of the loan amount.) Depending upon the lender, you may be able to lock in the interest rate and number of points that you will be charged when you file your application, during processing of the loan, when the loan is approved, or later. A lock-in for a loan may be useful because it’s likely to take your lender several weeks or longer to prepare, document, and evaluate your loan application. During that time, the cost of mortgages may change. But if your interest rate and points are locked in, you should be protected against increases while your applicatio
A Lock-In is defined as a promise to a certain interest rate for a given period of time in the case of processing a loan application by a lender. Lenders may be able to lock in interest rates at the time of filing an application, while processing a loan, or at approval. Since the loan processing period may take several weeks to prepare a Lock-In maintains the initial interest rate set by your lender and will not fluctuate with the housing market as it would happen without a Lock-In. There is also a downfall to this all, because if the market so happens to decrease its prices it would be up to the lender to allow a Lock-In at a lower rate.
The lock-in represents the interest rate you choose and will be the interest rate used to factor your monthly payment. The lock-in secures the interest rate during the process of your loan approval as long as your loan is processed and closed prior to the rate expiration date. This date is given to you when you lock-in the rate. Depending on the type of transaction and the time you need, lock periods can be valid anywhere from 10 days up to 180 days. 17.
