Locking in Interest Rate

Because interest rates can fluctuate, it sometimes pays to lock in an attractive interest rate. A lock-in is a lender's commitment to guarantee a specific interest rate if you purchase a home within a certain period of time.

Steps:

1. Talk to your lender about its conditions for locking in a rate.
2. Ask if you will have to pay points to lock in the rate. (A point is equal to 1 percent of the amount you will be borrowing; buyers often pay points for locking in interest rates, for buying down interest rates, and as part of closing costs.)
3. Find out if locking in will affect your interest rate. Some lenders may require you to pay a slight premium over a current rate to lock in their commitment.
4. Ask your lender how long the lock-in is good for. Typically, a lock-in will require that the purchase be finalized, or closed, within a preset time period.
5. Tell your lender when you're ready to lock in a rate.

Tip:

If interest rates are rising, or if they have been volatile, locking in a rate can give you some peace of mind.

When the economy is strong, money is "loose" and interest rates are relatively stable, lenders are usually more willing to lock in rates.