What is a lock-in agreement?

What is a lock-in agreement?

• A. A lender's promise to hold a certain interest rate and a certain number of points for a borrower, usually for a specified period of time
• B. A promise to provide discount points at closing
• C. An agreement to waive appraisal requirements
• D. A guarantee of loan approval regardless of credit

Answer: (A)

A lock-in agreement is a commitment by the lender to fix the borrower’s interest rate (and usually the number of discount points) for a specified period during the loan process. This protects the borrower from rate changes while the loan is being processed and underwritten. The rate and points are set in the lock, so if market rates rise—up to the expiration date—the borrower still gets the locked rate. If closing happens within the lock period, those terms apply; if not, the loan may need to be re-locked at whatever rates are available then. This concept is distinct from simply paying discount points at closing to buy down the rate, from waiving appraisal requirements, or from a guarantee of loan approval regardless of credit. A lock-in does not guarantee loan approval, nor does it waive required steps like appraisals.

A lock-in agreement is a commitment by the lender to fix the borrower’s interest rate (and usually the number of discount points) for a specified period during the loan process. This protects the borrower from rate changes while the loan is being processed and underwritten. The rate and points are set in the lock, so if market rates rise—up to the expiration date—the borrower still gets the locked rate. If closing happens within the lock period, those terms apply; if not, the loan may need to be re-locked at whatever rates are available then.

This concept is distinct from simply paying discount points at closing to buy down the rate, from waiving appraisal requirements, or from a guarantee of loan approval regardless of credit. A lock-in does not guarantee loan approval, nor does it waive required steps like appraisals.