What does it mean to lock in an interest rate?

Interest rates, which are based on economic conditions, can change up to several times daily, so in the few days or weeks between the time you choose a lender and actually close your loan, your interest rate may “float”, meaning the rate you were quoted is not guaranteed. If you “lock in” your rate, you are guaranteed the interest rate quoted to you will not change before your closing. Another option is to ask for an agreement with your lender that caps how much higher your interest rate can go, and also allows you to take advantage of a lower rate, if rates fall before you close.

Locked in and capped interest agreements usually have a small window of time to execute, and after that they expire, so you’ll want to ask for these when you know you are close to closing. Your lender can help you work this out to your best advantage.

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