How Time Affects Your Mortgage Rates: Home Loan Insights for Homebuyers

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Before I started my career as a loan officer, I considered myself to be a very smart and educated buyer. When my husband and I were in the process of purchasing our second house in the 1990s, I called at least 10 different lenders. I shopped around so I could find the very best lender and rate. 

The interest rate for good credit at that time was 6.875 percent, and that’s the rate I locked in... or so I had thought. We constructed a house, but the lender had not explained what locking in interest-rate terms or rate lock expirations were. I was in for a terrible, shocking surprise.

After the house was built, she said, “It's time to lock in your interest rate." I was stunned. “What do you mean?" I asked. “Where's my 6.875 percent?” She explained that the rate was on a 30-day lock, but we had taken six months to build the house. At that point, with good credit, the rates were 8 percent. Yes, 8 percent. I almost couldn't afford the house I had just spent six months building. I learned a hard lesson that you can learn from my bad experience -- the timeframe from starting to closing on your home loan will affect your rate. 

Mortgage rates are not like other loan rates. Rates are typically based on a 30-day lock. The second you need a different time frame, your rate changes. Rates can change daily and sometimes multiple times a day. Before you officially lock in your rate, it is subject to change.

If you locked in your rate and then fail to meet that closing date, you will incur lock extension fees because your loan can't be delivered in time. You can lock in on a purchase once you have a closing date and an executed contract. On a refinance, you can generally lock in once you have turned in your documents and paid for an appraisal. A rate lock extension fee is not a “junk fee." It is not a way for a lender to make more money from you. It is a valid cost. 

When you're trying to get a quote, don't forget to ask how long of an interest rate lock you will need. Also, be aware of the rate lock expiration date in relation to your closing date. Avoiding these extension fees can save you from paying expensive fees.