What is a rate lock and when should I use one?

Interest rates fluctuate daily based on economic conditions. A rate lock protects you from rate increases between the time you apply and the time you close. When you lock, the lender guarantees that rate for a specific period, typically 30, 45, or 60 days. Longer lock periods cost more, either in points or a slightly higher rate. You should lock when you are satisfied with the current rate and you have a signed purchase agreement. Trying to time the market by waiting for rates to drop is risky. Rates can rise unexpectedly and cost you thousands. A float-down option allows you to take advantage of a lower rate if rates fall after you lock. This option usually costs extra but provides flexibility. If you are building a new home and need a longer lock period, expect to pay more. Lenders may also offer a one-time float-down if rates drop by a certain amount. Your lender should discuss rate lock timing with you as your closing date approaches. The right time to lock depends on your risk tolerance, market conditions, and closing timeline.