Rate Locks — How They Work and When to Lock Yours

Key Takeaways - A rate lock guarantees your interest rate for a set period — usually 30 to 60 days - Rates can move significantly between application and closing — a lock protects you - Locking too early can be costly if the deal takes longer than expected - Float-down options let you capture a lower rate if market rates drop after you lock - Talk to your loan officer before deciding when to lock Mortgage rates change daily, sometimes significantly. A rate lock is the mechanism that protects you from those changes once you have agreed on terms with a lender. What a rate lock is When you lock your rate, the lender commits to honoring that rate for a defined period — typically 30, 45, or 60 days. During that window, if market rates rise, your locked rate stays unchanged. If rates fall, your rate also stays where it is (unless you have a float-down option, described below). When to lock Most buyers lock their rate after a purchase contract is signed. At that point, the sale timeline is defined and the closing date is set, which lets you choose a lock period that covers the entire process. Locking before you have a signed contract is risky — if the property falls through and you find a different home, your lock may expire and you will need to re-lock at whatever rate is current. How long should your lock be? The lock period should cover your expected closing date with some buffer. If your contract calls for a 30-day close, a 45-day lock gives you a two-week cushion. Longer locks cost more — lenders typically charge a fee or a small rate premium for a 60-day lock compared to a 30-day lock. On a tight timeline or a complicated transaction (estate sale, new construction, delayed title issues), a longer lock is worth the cost. What happens if your lock expires If the closing is delayed past your lock expiration, you will need to extend the lock. Extension fees vary by lender but are typically 0.125% to 0.25% of the loan amount per week. On a $350,000 loan, that is roughly $440 to $875 per week of extension. Avoid this if possible by choosing the right lock period at the outset. Float-down options Some lenders offer a float-down provision that lets you capture a lower rate if rates fall by a defined amount after you lock. These options are not free — they typically carry a cost of 0.25% to 0.5% of the loan amount — but they can be worth it if rates are volatile or appear to be trending down. Should you lock now or float? This is the question every buyer asks. Rates are influenced by Federal Reserve policy, employment data, inflation reports, and global economic events — no one can predict their direction reliably. The general guidance: if today's rate produces a payment you can comfortably afford and accomplish your goals, lock it. The risk of waiting for a lower rate is that rates move the other way. At KP Funding, your loan officer will walk you through the current rate environment and help you decide on timing based on your specific transaction and risk tolerance. KP Funding Corporation | NMLS #2442789 | Equal Housing Lender | Licensed in Florida | Not a commitment to lend. Rates subject to change.