How A Rate Lock Works Between Contract And Closing

A rate lock is a dated commitment from a lender to honor pricing on a specific loan for a limited period. It is neither automatic nor unconditional, and it interacts closely with the closing calendar.

What is being locked

The lock attaches to a particular file: a borrower, a property, a loan amount and a program. Change any of those materially and the lender may reprice the loan.

Pricing has more than one component. A rate is paired with points or credits, so two locks at the same rate can carry different costs at closing.

Because the commitment exposes the lender to market movement, longer lock periods generally cost more than shorter ones. The length chosen reflects how long the transaction is expected to take.

Why the expiration date matters more than the rate

Locks run for a set number of days, and the clock does not pause for delays. A slow appraisal, a title issue or a seller's repair timeline can push closing past the date.

Extensions are usually available and usually carry a fee. Whether the buyer, the seller or the lender absorbs that cost depends on who caused the delay and on what was agreed.

If a lock expires without an extension, the loan is repriced under whatever terms are current. That can move closing costs in either direction, which is precisely the uncertainty the lock existed to remove.

What can void a lock before it expires

Locks assume the file stays as described. A change in employment, a lower credit score, a different down payment or a switch in loan program can trigger repricing.

Property-side changes count too. If the appraisal comes in low and the loan amount shifts, or if the property type is reclassified, the original pricing may no longer apply.

This is why lenders ask borrowers to open no new credit and move no large sums between contract and closing. The instruction protects the lock as much as the approval.

Float-down provisions and what they do

Some locks include a one-time option to move to a lower rate if market pricing improves before closing. The feature is not universal and is usually priced into the lock.

Conditions apply: a minimum improvement threshold, a window during which the option can be used, and a requirement that the loan otherwise stays unchanged. The details are written into the lock agreement.

Without such a provision, a lock cuts in both directions. It protects against increases and removes the benefit of decreases, which is the trade being made.

Where to read the terms

Lock agreements are separate documents from the loan estimate and the closing disclosure, and their terms vary by lender. Fees, extension pricing and float-down rules are not standardized across the market.

Lending practices and disclosure requirements also change over time. Questions about a specific lock belong with the loan officer who issued it, in writing, before the closing date is set.