Locking in FHA Mortgage Rates

A rate lock is your lender's commitment to finance your home at an agreed-upon interest rate and price. Your rate lock is good for a specific time period before it expires. Locking in your rate might cost you nothing (most lenders let you lock for 15 days for free), but in general, the longer you want your mortgage rate locked, the more it costs to do so.

Until you have an actual lock confirmation in writing, you don't necessarily have a locked loan. Your rate can be locked even if you don't yet have loan approval, but you do need to have a property address, so you can’t lock in your mortgage rate before you start shopping for a home.

How Do You Lock in the Best FHA Mortgage Rates?

FHA Mortgage rates move with financial markets and can change several times a day. So, if you want to lock in a particular rate, you may have to do it quickly. Don’t want to be glued to the financial pages all day? No problem – check out the mortgage negotiator, which tells you if the rate you’ve been offered is a good one. 

But what if rates go down after you lock? If you want to add certainty to the process, you can pay a fee for a "float down." This is an interest rate lock that secures today's rate when you lock in, but you get a lower rate if mortgage rates have improved when you close your loan. For some, especially if they are locking far in advance, this added certainty is worth the extra fee.

What if you don’t close on time and your rate lock expires? You have a couple of choices – extend the lock (many lenders will give you a couple of extra days for free, while another two weeks can cost .125 percent to .25 percent of your loan amount), relock for another 15 days (also free), or float your rate until you’re ready to close. Unless you’ve paid for a float down, however, all relocks are “worst-case”, which means if rates have remained the same or dropped, you relock at your original rate, but if they’ve risen, you lock at the higher rate.

Important Considerations for FHA Mortgage Rate Locks

One complication of an FHA mortgage is the case number that’s assigned to you as soon as you apply for your mortgage. Properties are allowed only one case number at a time, so if you’ve applied with one lender, it has your case number. If the mortgage negotiatior indicates that other lenders can offer you a better deal, you’ll need to get your current lender to release your case number before you can lock your loan with a different mortgage lender.

Don't Lock Your Rate Prematurely

There are several reasons NOT to lock in an interest rate. First, if you are refinancing and have a target rate for the deal to make sense, don’t pull the trigger if rates are too high to make refinancing worthwhile. Sign up for Rate Alert emails, which will notify you when rates drop into your target range. The right interest rate will make your refinance pay for itself and generate some savings.

If you really like the challenge of following the markets and enjoy a little gambling risk, floating your rate could provide a couple of dividends -- first, a 30-day interest rate lock typically costs about a quarter point in fees (60 days costs about a half point), which you could save by floating or going with a 7- to 15-day lock. Second, there is always the chance that rates could drop and you could end up ahead -- just determine upfront if you can stomach the ride and deal with it if the market doesn't go your way.

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