Understanding Mortgage Rate Locks in Today's Market

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Last week, Orion’s team stayed focused on supporting our brokers and their borrowers as the Federal Reserve’s Open Market Committee lowered the target for overnight Fed funds — the rate banks use for overnight borrowing to maintain reserves at the Federal Reserve. It’s key to note the word overnight, because that timeline does not align with 15- or 30-year mortgage rates. In fact, while the Fed adjusted short-term rates, long-term mortgage rates rose due to market speculation about future rate direction. The Federal Reserve’s monetary policy decisions can affect mortgage rates indirectly by influencing overall lending costs, and current mortgage rates are also shaped by broader housing market trends.

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As a result, borrowers who had already locked their rates suddenly hoped for lower pricing — even though rates were moving higher. This raises a familiar question: what exactly is a mortgage rate lock, and why does it matter?

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What a Mortgage Rate Lock Means for Mortgage Rates

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A mortgage rate lock is an agreement guaranteeing a borrower a specific interest rate and pricing for a set period while they prepare to close. During that lock period, both the lender and borrower commit to those terms.

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Several key factors influence the final rate and pricing. The borrower’s credit score remains one of the biggest components — the stronger the score, the better the pricing. Loan-to-value (LTV) also plays a significant role, calculated by dividing the loan amount by the appraised value of the property. Loan-level pricing adjustments related to LTV apply to every mortgage loan and help determine the total cost.

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When Borrowers Typically Lock Interest Rates

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Borrowers usually lock their interest rate either at application or after the appraisal. For purchase transactions, locking early — once required documentation has been submitted — is often the most strategic move. There are many variables in a purchase: appraisal, inspection results, contract deadlines, underwriting, and more. Brokers help manage all of these moving parts.

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Refinances are different — typically elective rather than urgent — giving borrowers more flexibility in timing. Refinancing a home loan can help borrowers secure a lower rate or take advantage of a rate reduction feature if available, making refinance an attractive option for those seeking better loan terms.

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Partnering With Brokers for Smart Lock Decisions

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Ultimately, rate-lock timing is a strategic decision shared between the broker and the borrower. Orion guarantees rate and pricing for the lock period, and brokers help ensure their clients lock at the right moment — ideally after submitting a complete file that is highly likely to close. Rate-lock extensions and renegotiations can be costly, so brokers educate borrowers on the trade-offs of locking early versus waiting for the appraisal. Every borrower profile and property scenario is unique, and an experienced broker helps ensure clients make the most informed choice — without risking unnecessary cost.

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Homebuyers and refinancers generally choose to lock in their rate either at loan application or at the appraisal. If your client is buying a home, locking in the interest rate at the beginning of the loan process after turning in the required documentation is usually the smartest move as there are many other factors to be concerned about in the homebuying process, such as the appraisal, inspections, contractual contingencies, and underwriting. Brokers are active in all of these. Your client is more or less “under the gun” to perform whereas when they’re refinancing, it is more of an elective opportunity, not a necessity. When considering loan types, the 30 year fixed mortgage is the most popular option, offering a stable interest rate and predictable monthly payment over the life of the loan. In contrast, an adjustable rate mortgage typically starts with a lower fixed rate for an initial period before adjusting periodically based on an index, which can result in future payment increases or savings depending on market conditions.

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Ultimately, the choice for locking in an interest rate is yours and your client’s. We guarantee a price and rate, and you agree to that price and rate. Orion and our AEs try to minimize rate lock extensions or renegotiations since they are expensive, and it makes the most sense to lock after a borrower has submitted a loan file that has a good chance of closing. All loan applications are subject to credit approval, which is required before finalizing the rate and terms. Brokers are well versed  on the pros and the cons of locking in the interest rate upfront or waiting until the appraisal comes in as each borrower profile and property is different. Brokers should be able to help ensure the client is never throwing away good money when buying or refinancing.

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