When you apply for a home loan, you will be quoted a rate, but that rate is for that day only. Unless you also close on that same day, which is unlikely, you have to take a chance on the interest rate being higher when you eventually close.

But lenders today frequently offer their clients a lock in period for their loan at the time of application. They know that the time between deciding to shop for a home and actually finding and closing on it may take a while. They also realize that borrowers don?t want to take a risk on loan rates increasing during the period they are shopping for their loan. So a lock in period can be negotiated with the lender, which will fix the rate for a certain length of time. This applies to either interest rates and points.

You may be able to lock in the interest rate and points either as you apply for the mortgage, during the loan processing or when the mortgage is approved.

If the lender offered you a 30 day lock in period for a rate of 5.5%, with one point, that is what it will be. What this gives you is the privilege to keep that rate, even if you do not close on the loan for another 30 days. This thirty day period is the norm, since getting all the paperwork taken care of may take that long. However, if you prefer a longer period, you may have to pay since banks do not want to take such a risk for a longer time without getting something in return.

Keep in mind, however, that a locked in rate may prevent you from taking advantage if interest rates actually decrease, unless you have a clause that prevents this from occurring. This has to be done as you apply for the lock in rate.

Once the 30 day period is over, your agreement is over and you will be given whatever the new market rate is. The lender will usually permit you to extend the period, so long as there have not been wide movements in interest rates.

You can have a combination of lock ins:

Both rate and points are locked in. Both interest rate and number of points are fixed.

Locked in rate, however no points locked. The bank may opt to protect himself by setting a fixed base rate for the lock in period, but maintaining the right to change the points to maintain the rate. The bank can charge additional points if they want to.

In a turbulent interest rate environment, it is very wise to choose a lock in period, and perhaps even pay a slightly higher interest rate for a longer period.