When you’re applying for a mortgage, securing an interest rate before your loan closes is vital to protect against rate fluctuations. This is where a rate lock comes into play—a lender’s commitment to hold a specific interest rate for a defined period, commonly 30, 45, or 60 days. The Lock-In Agreement Disclosure is the formal document that captures this commitment.
This disclosure provides a complete summary of your rate lock agreement, including:
- Locked Interest Rate: The exact annual interest rate guaranteed by the lender.
- Loan Program Type: Specifies whether your loan is a fixed-rate mortgage, adjustable-rate mortgage (ARM), or another product. Learn more about Fixed-Rate Mortgages and Adjustable-Rate Mortgages (ARM).
- Loan Amount: The principal amount on which the rate lock applies.
- Lock-In Period: The duration your rate lock is valid, e.g., 30, 45, or 60 days.
- Expiration Date: The date when the rate lock expires, after which the rate may change.
- Fees: Any charges associated with securing or extending the rate lock.
- Lock Conditions: Terms that must be met for the lock to remain valid, such as credit score requirements or appraisal values.
- Relock Policy: Details on options and costs if the lock expires before closing.
Receiving this disclosure typically happens after your formal mortgage application and your decision to lock the rate. It serves as your legal record ensuring transparency in your loan terms and rate guarantee.
To illustrate, consider a homebuyer named Sarah who locks a 6.5% interest rate for 45 days on a 30-year fixed-rate mortgage. Her Lock-In Agreement Disclosure explicitly states the rate, lock term, expiration date, and stipulates there will be no fees for this lock period. If the loan doesn’t close in time, Sarah knows what fees or new rates might apply.
Common mistakes to avoid include:
- Not reviewing the lock terms carefully,
- Overlooking the expiration date leading to unexpected rate changes,
- Ignoring fees for extensions or relocks,
- Changing loan terms after locking which may void the original lock.
Tips:
- Shop multiple lenders before locking your rate.
- Coordinate closing timelines to match your lock period.
- Stay in communication with your lender about any delays.
- Keep a copy of your Lock-In Agreement Disclosure for reference.
Understanding your Lock-In Agreement Disclosure can prevent costly surprises and help you navigate your mortgage process more confidently. For further insight, explore related topics such as Interest Rate Lock and Loan Estimate.
For authoritative guidance, visit the Consumer Financial Protection Bureau’s Your Home Loan Toolkit and refer to IRS guidelines on mortgage disclosures for compliance.
