If it’ll be a while before you move into the home you’re buying—you can lock in your mortgage interest rates today. That will ensure your rates won’t rise if various economic indexes change before you close. Depending on your lender, rates are based on bonds, treasury bills, the cost of savings or the cost of funds index. Your interest rate is often crucial to whether you can afford your house payments. If your rate rises significantly before you close, you may end up with a shocker at closing! Your payment might have increased so much, you’re no longer qualified to buy your house. 

Locking in rates prevents that from happening. Most lenders will lock your interest rate 60 to 90 days before you close. Some let you lock even farther out. But-- what if rates drop once you’ve locked? Something called a "lock float-down" or a "range protector" will let you take advantage of the new lower rates, even if you’ve locked. For that privilege, you may be asked to pay a tax-deductible fee of about one-half to one percent of your loan amount. If it appears rates are static, you probably don’t need to lock. But if experts predict rates are on the rise, investigate locking in! You can do yourself a huge favor by ensuring your interest rate won’t skyrocket before you close.