What does it mean to "lock in" a mortgage rate?

To "lock in" a mortgage rate means to guarantee a specific interest rate during the application process. This locking mechanism helps protect the borrower from any increases in interest rates that might occur before the loan is finalized. When a borrower locks in a rate, they ensure that the interest rate remains stable for a predetermined period, typically until closing. This is beneficial because it provides certainty in monthly payment amounts, aids in budgeting, and reduces the stress associated with fluctuating rates.

While securing a lower interest rate that is time-sensitive is related to the concept of locking in a rate, it's important to distinguish that the primary purpose of a lock-in is to guarantee the rate that is offered during the application process. Therefore, the focus is on maintaining a specific rate, rather than necessarily achieving a lower one, although that can be a potential outcome when rates generally trend downward.