Money Minute: Should you lock in your mortgage rate? By Mandi Woodruff

A mortgage rate lock is a when a lender agrees to offer a mortgage loan to a homebuyer at a specific interest rate for a set period of time if the mortgage closes by a certain date.The main advantage of a rate lock is that it protects the buyer from rate changes during the lock period. You'll pay a small fee for a rate lock, which varies lender to lender but typically comes in the form of a percentage of your loan amount. Most rate lock agreements are  good for 30, 45 or 60 days — the longer your lock period, the higher your fees will be.

Since mortgage rates fluctuate daily, homebuyers can drive themselves crazy trying to pick the exact right time to lock in their rates. If you lock it in too early, rates might fall. If you wait too long, they might go up.

But here’s a reality check — you’re not a mortgage analyst getting paid to time the market. You just want to find a house you can afford, right? If you look at the current rate, do the math and come up with a mortgage payment you can afford, then it probably makes sense to go ahead and lock in that rate. Also, get some real perspective by looking at how rates have changed over the last 30 years — they are at historic lows today.

Strategically, you want to wait to lock in your rate until you’ve found your dream home and your offer has been accepted. If the sale falls through or takes longer than expected, your rate lock period will expire and you’ll either wind up paying fees to extend it or get stuck with whatever rates are available now.  

Rate locks aren’t without cost, though: You’ll often have to pay a fee, levied as a percentage of the loan amount, which increases with the length of the lock period.

One last tip: Once you’re ready lock in your rate, be sure to get it in writing. You don’t want any confusion with your lender later on. 

Culled from yahoo finance