Your mortgage rate is on the list as one of the most important factors to consider when buying a home. Obviously the lower your rate the less you have to pay back.  Locking in a low mortgage rate in a market that is fluctuating up to a full point over the first half of 2008 will be critical.

What does it mean to 'lock' in a rate?

Locking your interest rate down means that the broker or banker will give you a commitment for a loan at today's current rate (typically for 30-60 days). While locking in your rate before you are ready to close puts you on a time table, it  lets you know upfront the points and terms that you will be buying under.  Some rates can be locked for 15 days and some for up to three months.  You still need to buy before that rates terms expire.  Otherwise you will be back to negotiating a rate and everything else.

A few things you need to do before locking things in:
• Shop around:  your rates and terms may vary wildly from lender to lender and rate locks can be a serious cost.  Don’t be afraid to shop before you lock that rate.
• Make sure you allow for loan processing time in your lock period and be sure to be ready to put in that loan application before the terms will expire.  This includes checking credit reports and even a pre-approval can help.

As with everything it is important to get it in writing.   The contract has to lock the interest rate, the points, terms and other costs.  It must include the names the mortgage will be in, the cost of the lock the terms as well as the effective date and its expiration date and time.  If you have any post-lock options make sure they are included in the contract.

Keep in mind that even a half a percent fluctuation can cost you thousands of dollars.  If you lock in your rate you can be better prepared for what the bottom line of your mortgage will be.  With an uncertain market, this can only help!