Anyone who has been looking for a mortgage for any time will be aware that a lock in period is the period during which the bank guarantees the rate and points of the mortgage loan. For instance, if you obtain a 30 day lock in for 6 % and 2 points, the lender has to honor that rate and number of points, even if the interest rates go up within that 30 day period.

If you don’t close on your loan within the thirty days, of course, you will lose that provision. In many cases, this does not cause any loss since the interest rates may not have increased and may even have decreased.

A thirty day lock in period is most common, but it is not an easy matter to find a home, negotiate a price, have a home inspection and finally close within a thirty day period. For this reason some buyers will opt for an added 15 days, but lenders charge extra for this.

The first thing most borrowers have to consider whether or not they want a lock in rate. How comfortable are you with the risk of interest rates rising? Or are you of the opinion that a faltering economy means rates are going no where but down?

Another concept many borrowers have is that they don’t want to have to make this decision, they just want to know the numbers they have to work with in buying their home.

A lock in rate can be a bit of a Catch-22, since buyers are advised that the most advantageous bargaining position to be in is to have a pre-approved loan. This means you have to negotiate your home loan and have a locked in rate in advance when you start looking for a home. That adds an extra time squeeze since you have to find the home, negotiate and close completely in thirty days.

Have a fairly good idea of the type and location of home you want: this will make the shopping process faster. The good news is that most sellers are not in a good negotiating position in the current housing market, so that stage of the process should go quickly and smoothly. It is a good idea to hire a home inspector in advance so you don’t have to waste time on this step.

Some borrowers barely qualify for a loan, so if they are given a lock in period, they should take it since changing situations may squeeze them out of a loan. Those in such a position risk either changes in their own finances or changes in the economy disqualifying them from a loan, so they should grab it while they can.

The bottom line is you should decide to use a lock in rate if you: 1) think rates will go up 2) don’t want to take risks on the rate or 3) or border line qualifying and prefer not to lose the rate.