A guarantee for a set period of time to “hold” a specific interest rate on a loan for a property in contract until the date that the loan funds.
A rate lock is a guarantee for a set period of time (15 or 30 days typically) to “hold” a specific interest rate on a loan for a property in contract (i.e., a buyer’s written offer has been formally accepted) until the date that the loan funds. Rate locks can normally be extended for a few days (and up to a few weeks, depending on the investor) beyond their original expiration date in order to preserve the rate if there are any delays to the closing timeline. The extension will be in exchange for a one-time “lock extension fees” added to closing costs.
The benefit of a rate lock is that it acts as a hedge to protect borrowers from market rate hikes; as somewhat of a double-edged sword, this also prevents borrowers from holding out and regularly requesting their rate be lowered (i.e., a “rate rolldown”) whenever there’s a slight dip in the market. JVM does lock with several investors who have the option to roll down a locked interest rate if there’s a significant enough dip in the marketplace. We monitor the market for this opportunity from the moment a client locks in their rate until their loan docs are drawn.