Rate lock timing is a lender decision, but agents set the stage for it. Your contract dates decide how long the lock has to last, and a closing that slips past the lock can cost your buyer real money. You don't pick the rate or tell buyers when rates will move. You do make sure the lock and the contract calendar match. Here's how.
The short answer
Most buyers lock after they're under contract on a specific home, for a period long enough to cover the closing date with a little cushion. Common lock lengths are 30, 45 or 60 days. Longer locks can cost more. If closing slips past the lock, the lender may charge an extension fee or reprice the loan. Nobody can predict rates. The buyer and lender choose when to lock. Your job is to keep the dates tight and tell the lender the moment anything changes.
Step by step
- Introduce the lock idea at the consult. Tell buyers there's a step called a rate lock, and their lender will walk them through it. Don't give rate advice. See what agents should never say about loans.
- Match closing date to lock length. Before you write the offer, ask the lender what lock periods they offer and what it costs to go longer. Pick a closing date that fits.
- Send the contract to the lender the same day. Most locks need a property address and a signed contract.
- Let the buyer and lender decide when to lock. Some lock right away. Some float. That's their call with their loan officer.
- Ask about a float-down. Some lenders offer an option to lower the locked rate if market rates drop. It may cost extra. The buyer asks the lender.
- Protect the calendar. Inspection, appraisal and loan deadlines all feed the closing date. Missing them can push closing past the lock.
- Watch for changes. A price change, loan amount change or new credit can change the lock terms. Tell the lender immediately.
- Track the expiration. Put the lock expiration on your contract-to-close calendar. See contract to close checklist.
A worked example (illustration only)
Contract signed October 1. Closing set for November 10 (40 days). Lender offers 30-, 45- and 60-day locks.
| Lock length | Covers Nov 10? | Note |
|---|---|---|
| 30 days | No | Would expire Oct 31 |
| 45 days | Yes, with 5 days cushion | Common choice |
| 60 days | Yes | Usually costs more |
Illustration only. A lender sets the real lock terms and costs. The annual percentage rate (APR) would differ from any note rate. This is not an offer of credit. Program rules change. See consumer rate lock information at consumerfinance.gov.
How to explain it to your client
"Once we're under contract, your lender will talk to you about locking your rate. A lock holds your rate for a set number of days while we close. I can't tell you where rates are going, and neither can anyone else. What I can do is make sure our closing date fits inside your lock, so you don't pay to extend it. Call your loan officer today and ask what lock lengths they offer."
Watch-outs
- Don't predict rates. Ever. Point buyers to the lender.
- Don't quote rates or payments yourself. Use the lender's numbers in writing.
- Closing delays cost money. Builder delays and slow repairs are common reasons locks expire. Plan cushion on new construction.
- Changes reset things. A new price after an appraisal or inspection can change the loan amount and lock.
- Rate shopping. Buyers can compare lenders. Make sure they understand the lock terms, not just the rate.
Further reading
- Colorado mortgage rates, updated weekly, on kennarealestate.com
- Who is buying a home at 7 percent on kennarealestate.com
This is training for real estate agents. It isn't legal, tax or lending advice. A licensed loan officer sets loan terms. Check with your managing broker.
Questions
Can a buyer lock before finding a home?
Some lenders offer lock-and-shop programs. Most locks need a property. The buyer should ask the lender.
What happens if the lock expires?
The lender may charge an extension fee or reprice the loan at the current market. That's why calendar control matters.
Who pays the extension fee?
Usually the buyer, unless the contract or a negotiation says otherwise, such as a builder paying for its own delays.
What is a float-down?
A lender option that may let the buyer take a lower rate if rates fall after locking. Terms vary.
Should I tell my buyer to wait for rates to drop?
No. That's a prediction. Help them find the right home and let the lender handle rate timing.
Brian Lee Burke is the founder of PadLeaders, a Colorado real estate broker licensed since 2003, team leader of The Kenna Group at Keller Williams DTC (formerly Kenna Real Estate Group) and the author of Mastering Real Estate and The Real Estate Playbook. More about Brian.