We're hearing lots of chatter about mortgage rates these days. Will they continue to rise? By how much? Should I buy now to avoid higher rates? 

These are all valid questions, and, unfortunately, there's no crystal ball. However, if you've found a home you like, your mortgage lender might be able to help. 

Most lenders offer mortgage-rate locks for consumers who want to protect themselves against future mortgage rate increases. The conditions of rate locks vary from lender to lender, so here are some questions to help you learn everything you need to know before signing. 

What is a mortgage-rate lock? 

Mortgage rates go up and down, but the process of getting a mortgage can be a long one. Even a slight change in the interest rate on a mortgage can make a big difference in your monthly payment and overall cost. And if you're buying close to the upper limit of what you can afford, an increased mortgage rate can even mean you're no longer qualified for the mortgage you need.

Lenders offer mortgage-rate locks to buyers who want to ensure they get "today's rate" and are not subject to future rate increases. Under a rate lock, the lender agrees to lock your mortgage in at an agreed-upon rate for some number of days — typically 30, 45, 60 or 90. If rates go up before your closing, no worries. You'll still get the lower rate. However, if rates go down before your closing, you might be stuck with the higher rate (more on that later). 

How much does a mortgage-rate lock cost? 

Again, this varies from lender to lender. Some require a deposit to lock in a rate. Others will offer a lock at a slightly higher interest rate and charge nothing up front. In other situations, you'll be required to pay points, which are essentially prepaid interest, to get the lower rate. And the longer your rate lock lasts, the more expensive it's likely to be. The important thing to understand here is that the rate lock is probably not free, even if you're not paying a fee up front. Before signing anything, be sure you're clear on exactly what it's going to cost you, how you're expected to pay it and when. 

When can I lock in a rate? 

You'll need to wait at least until your initial loan application has been approved. Until then, your lender won't be able to say with certainty what sort of rate you qualify for. You can lock in a rate before you sign a purchase contract, but be careful to allow for plenty of time to find a home and close if you do. 

What if the rate lock expires before I close? 

Despite your best planning efforts and mine, things come up in the homebuying process that can cause delays. If your mortgage-rate lock expires, your lender might have a provision to allow you to extend the lock, possibly at a cost. Depending on the interest rate when the lock expires, you might also just lock in at the new rate if you and your lender can make the numbers work. 

What if I lock in a rate and then interest rates go down? 

Make sure to ask your lender this question. You might be out of luck, but often lenders will "float down" your rate to give you the lower one. Again, find out up front whether you'll have to pay for the service. 

Does the rate lock guarantee my rate, no matter what, as long as I close in time? 

You'll get the rate as long as nothing changes on your end. Remember, your mortgage lender will do one final financial review right before closing. If something negatively affects your financial situation — a change in income, a late payment, newly opened lines of credit — the lender can opt out of the rate lock because you no longer qualify. 

Locking in a mortgage rate is a little bit of a gamble, but it's one worth considering as it can save you thousands of dollars over the life of your mortgage. Discuss your options thoroughly with your lender to get the information you need to make a smart business decision. 

Do you have other questions about the home-buying process? Contact me anytime at 540-353-0123 or sonya@sonyadickinson.com.