A rate lock protects a specified loan price for a specified period, subject to its terms. It doesn't approve the borrower, finish the appraisal or guarantee the closing date. Get the commitment in writing and make sure it covers the transaction you intend to close.
The right lock decision starts with how much rate risk your purchase can tolerate. It shouldn't depend on a confident prediction about next week's market.
What needs to be written down
Confirm the note rate, discount points or lender credit, loan program, amount, lock expiration and any conditions. The Loan Estimate indicates whether a rate is locked, but the separate agreement and lender policies may contain important details about extensions or changes.
Ask whether the expiration relates to signing, funding, delivery or another milestone under that lender's policy. You shouldn't infer that signing at the last minute necessarily satisfies every lock requirement.
Keep the written confirmation. A conversation about a rate isn't a useful substitute when the closing figures later differ.
Lock length is part of the price
A short lock may look attractive when closing is close and the file is straightforward. It becomes less attractive when important work remains. A condo questionnaire, unresolved insurance condition, appraisal repair or slow title item can consume the remaining days.
Ask the team which milestones are actually complete. The contract closing date is an objective, not proof that underwriting and settlement can finish by then. Compare a lock that covers a realistic schedule with a shorter lock plus the potential cost of extending it.
Longer locks may price differently. There's no universal extension charge, free extension entitlement or mandatory float down available across lenders.
Put an extension in dollars
Hypothetical example: a $480,000 mortgage has an extension priced by the lender at 0.125% of the loan amount. That would cost $600. At 0.25%, the expense would be $1,200. These are illustrations of percentage math, not fee quotes.
Ask whether the fee is paid in cash, handled through the loan price or covered by someone responsible for the delay under a written arrangement. Also ask what happens if another extension is needed. A concession for one delay doesn't establish the rule for every extension.
Compare the cost with the consequences of letting the lock expire. The lender may have a specific relock policy, and the old price may no longer be available. Obtain the actual alternatives before making the decision.
A float down is a contract feature
A float down may permit a lower rate after locking if the lender's conditions are met. The trigger, fee, eligible products, timing and method of measuring improvement can vary. Some policies are limited to particular lock programs.
Ask which market movement counts, whether points must remain the same and whether the lender can show the revised total cost before you elect the change. A lower rate with a new fee can be a worse short term trade.
For example, a hypothetical $900 fee that reduces principal and interest by $35 a month takes about 26 months of payment savings to recover. That is a cash flow screen, with balance differences and other costs still to consider.
A locked file can still change
A lock is based on transaction facts. A different loan amount, credit profile, occupancy, property type or product can change the applicable pricing or eligibility. This is different from the market simply moving against the lender.
If a change appears, request a written explanation identifying the changed fact and the resulting price adjustment. Don't assume every rate change is allowed, or that no rate change could ever be allowed. The actual lock terms and disclosure rules matter.
Credit changes before closing and insurance problems are two situations worth reviewing early because they can affect the final structure.
Floating can affect qualification
Suppose you have $10,000 of monthly qualifying income and $4,300 in proposed total monthly obligations. That is 43% DTI. An increase in the eventual mortgage payment of $180 raises the ratio to 44.8%, with everything else unchanged.
Those percentages aren't universal approval cutoffs. They show why a borrower with a tight approval can be exposed to more than a disappointing rate. The final payment may need a new underwriting review or a different loan amount.
Use a deadline based decision
Before choosing to float, identify the highest payment and closing expense the transaction can support. Before choosing to lock, identify the realistic completion schedule and the price of extra time. If either answer is missing, the decision is based on incomplete information.
Once locked, monitor the open conditions rather than assuming rate protection means the work is finished. An early conversation about a slipping deadline leaves more options than an extension request on expiration day.
Common questions
How long should I lock my rate?
Long enough to close with some room, often 30 to 45 days on a purchase. Longer locks usually cost more.
What happens if my rate lock expires?
You may pay an extension fee or have to relock at the current market price.
What is a float down?
An option to lower your locked rate if rates drop before closing, often for a fee and with limits.