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Interest Rate Lock

Understanding interest rate lock options

There are several things you will want to consider when deciding when to lock your interest rate.

What's an interest rate lock?

Mortgage interest rates may change many times every day. Choosing when to lock your interest rate is an important part of the home financing process.

  • When you lock your interest rate, the rate stays the same from the time of the rate lock until the rate lock expiration date (as long as there are no changes to your loan application that would affect your rate).
  • If you don't lock your interest rate, it can move up or down based on market conditions. This is called "floating" the interest rate.

A few things to consider when thinking about locking your rate

  • Carefully consider how long you'd like to lock your interest rate. Some loans require longer rate lock periods. If your rate lock expires before your loan closing date, you may need to pay a fee to extend the lock.
  • When you lock the interest rate, you're protected from rate increases due to market conditions. But if rates go down and you want to take advantage of the lower rate, you may need to pay an additional fee.
  • Before you can close on your loan, you'll need to lock in a final interest rate.

 Tip 

When you choose to lock your interest rate, you'll want to make sure your lock is long enough to take you to closing.

Reasons your interest rate may change

Even if your rate is locked, it can still go up or down if there are changes to your application, such as:

  • The type of loan you are applying for or your down payment amount changes.
  • The appraisal on the home you want to buy or refinance comes in higher or lower than expected.
  • Your credit score changes.
  • Some of your income information, such as bonus or overtime income, cannot be verified by the lender.

Frequently asked questions

What's an interest rate?

The interest rate is the cost to borrow money expressed as a yearly percentage. It's based on the principal amount of the loan and is used to calculate the monthly principal and interest payment.

Note: The annual percentage rate (APR) also represents the cost to borrow money as a yearly percentage, but it's a more complete measure of a loan's cost than the interest rate alone. That's because the APR includes the interest rate, plus discount points, fees, and other credit charges you need to pay to borrow money.

What things may affect my interest rate?

We consider a variety of factors when we determine the interest rate and costs of your loan. The process of reviewing these factors to determine your rate is called "risk-based pricing."

The typical factors we look at include:

  • Credit profile: We'll obtain a credit report that shows your current debts and payment history. The report will also include a credit score based on your overall credit history.
  • Property type: Investment properties, condominiums, manufactured homes, and multifamily homes are generally considered to be higher risks than single family detached homes.
  • Loan-to-value (LTV) ratio: The amount you want to borrow compared to the appraised value of the property. Generally, the lower your LTV ratio, the lower your interest rate and costs.
  • Debt-to-income (DTI) ratio: The amount of your mortgage payments and total debt payments compared to your income. A higher DTI ratio may mean higher interest rates and costs.
  • Type of loan: Purchase versus refinance, an adjustable rate versus fixed rate, or cash-out refinance versus rate-and-term refinance, may affect overall risk.

Some other things that may affect your interest rate:

  • Closing cost credits: You may be able to finance a portion of your closing costs as part of your loan. This may result in a higher interest rate.
  • Discount points: A discount point is paid to obtain a lower interest rate that may reduce your monthly payment amount.
  • Assets under management (AUM): For jumbo loans, you may qualify for a rate discount based on the value of your eligible deposit and/or investment assets at Wells Fargo Bank, N.A. and/or Wells Fargo Clearing Services, LLC. These assets are known as your assets under management (AUM).
  • Additional risk factors: We may also consider other risk factors when determining your interest rate and costs, including previous bankruptcies, foreclosures, or unpaid judgments.

Can I get a lower interest rate?

You may be able to lower your interest rate by making changes that lower your risk factors described above. Here are some of the things you may want to consider:

  • Putting more money down and lowering the LTV ratio.
  • Clearing any errors on your credit report.
  • Adding a co-signer with additional income and/or a higher credit score to support the loan. (For this option, you may need to start a new loan application.)
  • Changing the number of years of your loan term.

You also may be able to lower your rate by paying discount points.

What does it mean to lock or float my interest rate?

Locking your interest rate

  • When you lock your rate, we apply a specific range of interest rates to your loan application that are available at the date and time of your rate lock. We hold this range of rates for a designated length of time, known as your "rate lock period."
  • Interest rates may change many times every day. Locking your interest rate means the rate range will stay the same from the time of the rate lock until the rate lock expiration date, regardless of changing market conditions.
  • Even though your interest rate is locked, your final interest rate may be higher or lower than what was initially quoted to you if there are changes before your loan closes. However, your final interest rate will stay within the range of your initial rate lock. (See After I lock my interest rate, will my rate change.)

Floating your interest rate

  • If you don't lock your interest rate, it can move up or down based on market conditions. This is called "floating" the interest rate.
  • You may want to consider floating your interest rate if:
    • You're not sure how long it may take before you're ready to close.
    • You believe interest rates will stay the same or go down.
  • There is no fee to float your interest rate.

Why is it important to choose the right rate lock period?

You'll want to make sure your rate lock period is long enough to take you to closing. Some loans require longer rate lock periods.

  • It is important to choose a rate lock period that makes sense for your loan.
  • If your rate lock expires before the date of your loan closing and you choose to extend the rate lock, you may need to pay a fee. (See What if my rate lock will expire before my loan closing date.)
  • The length of your rate lock period may impact the cost of your loan, and some may require a fee up front. (See What happens if my loan requires a longer than average rate lock period.)

How can I help my loan close before my rate lock expires?

There are some things you can do to help your loan close on schedule:

  • Respond promptly to all requests for information and documentation.
  • Contact us right away if there are any changes to your loan application.

What happens if my loan requires a longer than average rate lock period?

Longer rate lock periods may be required for things like new construction or a condo that needs board approval. An upfront rate lock fee may apply.

  • Rate lock fees will vary based on the length of your rate lock period and interest rate chosen.
  • We will refund the rate lock fee if your application is denied.
  • If you withdraw your loan application or it is cancelled, the rate lock fee may not be refunded.

We'll let you know if your situation requires a longer than normal rate lock period and if any rate lock fees apply. If you choose a longer rate lock period option, you will receive a separate disclosure with detailed information.

What if I lock my interest rate and rates go down?

When you lock your interest rate, you're protected from rate increases due to market conditions. If rates go down prior to your loan closing and you want to take advantage of a lower rate, you may be able to pay a fee and relock at the lower interest rate. This is called "repricing" your loan.

After I lock my interest rate, will my rate change?

If there are no changes to your loan application and your loan closes on or before the rate lock expiration date, we will close your loan at the locked interest rate.

However, your interest rate may change from the time of your initial rate lock if there are changes to the factors used to determine your interest rate. (See What things may affect my interest rate.)  These kinds of changes may also be called "rate or price adjusters" because they can raise or lower the interest rate on your loan.

Here are some examples of changes that may raise or lower your interest rate:

  • The appraised value of the property is different than the value used when you initially locked your loan.
  • Your credit profile or qualifying income changes between the time you initially locked your loan and the loan closing.
  • Your requested loan amount increases or decreases after you initially locked your loan.
  • The type of loan you are applying for changes.
  • Your down payment amount changes.
  • Some of your income information, such as bonus or overtime income, cannot be verified.

If your interest rate or costs associated with the interest rate change, we will send you an updated Interest Rate Lock Agreement.

What if my loan is an adjustable-rate mortgage (ARM)?

If your loan is an adjustable-rate mortgage (ARM), the interest rate disclosed on the Interest Rate Lock Agreement will be the initial interest rate effective until the first change date of your loan. After that, your interest rate may vary in accordance with the change dates and index provided on your mortgage note and loan documents. You'll find additional information about ARMs in the Consumer Handbook on Adjustable-Rate Mortgages (CHARM) that you'll receive when you apply.

What if my rate lock will expire before my loan closing date?

If your rate lock will expire before your loan closing date, you have three choices:

  • You can extend your rate lock for a fee. (See How do rate lock extensions work.)
  • If your closing date becomes unknown or uncertain and you need more time to close the loan, you may return to float by unlocking your rate. (See Can I return my loan to a floating interest rate.)
  • You may cancel/withdraw your loan application. (See Cancel and Reactivate.)

What if my rate lock expires on a weekend or holiday?

If your rate lock period expires on a Sunday or legal holiday, we will automatically extend the rate lock until the close of business on the next business day.

How do rate lock extensions work?

If your rate lock will expire before your loan closing date, you can extend your rate lock for a fee. The fee amount is a percentage of your final loan amount. The percentage is based on the length of the extension (15 or 30 days), and can vary depending on the amount of your loan.

If you obtain a rate lock extension, any fees will be due at your loan closing. If we are primarily responsible for the closing delay, you will not be charged a fee.

Some common reasons you may need to pay the extension fee include:

  • Information you provide us is incomplete or delayed.
  • The property is not ready to be occupied.
  • There are issues clearing the title.

Can I return my loan to a floating interest rate?

If your rate lock will expire before your loan closing date, you may have the option to return to float by unlocking your rate.

  • If your closing date becomes unknown or uncertain and it won't occur on or before the rate lock expiration date, you may have the option to unlock and float your rate.
  • You can relock in 14 calendar days or less at your original rate and loan terms.
  • If you relock after 14 calendar days, you'll receive a new current market interest rate and rate lock expiration date.
  • There is no fee to return your loan to float.

Can I cancel my loan application?

If you no longer want to pursue a loan with us, you may cancel/withdraw your loan application at any time.

What if I cancel my loan and then decide I want to move forward?

If you cancel/withdraw your loan application and then decide you want to move forward:

Within 14 calendar days from the date we process your cancellation/withdrawal request: Your application may be eligible for reactivation at no cost to you. In this case, you will receive your original rate, loan terms, and rate lock expiration date.

After 14 calendar days: You will need to start a new application and obtain a new rate lock.

For example:

— On June 1, Emil completed an application for a refinance loan and locked his interest rate. On June 4, he decided not to proceed with the loan, and his application was canceled/withdrawn.

— One week later (on June 11), Emil changed his mind and decided he'd like to move forward with the loan application. Because it was within 14 days of processing the cancellation/withdrawal request, we reactivated his previous loan application. The rate lock and terms that were in place on June 1 were reinstated.


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