AS mortgage rates have edged higher, many borrowers have been locking in loan rates for a home purchase or refinancing.
A lock-in agreement -- also called a rate lock or rate commitment -- protects against sudden spikes in interest rates by freezing the terms of a loan while it is being processed, which could ultimately save a borrower tens of thousands of dollars in interest costs over the life of the loan.
For every percentage point rise in rates, 300,000 to 400,000 would-be buyers historically are priced out of the market in a given year, according to the National Association of Realtors.
The average rate nationwide on a 30-year fixed-rate loan, the most common type of home mortgage, hit 4.86 percent at the end of 2010, up from 4.17 percent in early November, according to Freddie Mac. On Thursday, the rate was 4.77 percent.
While lenders and mortgage brokers have reported an increase in lock-ins as rates have risen in recent weeks, they say these guarantees have been complicated by changes in the Truth in Lending Act -- which add more protection for consumers but also lengthen the loan-application process.
In 2010, the average mortgage took 52.1 days to close, up from 46.9 in 2009, the year the new regulations took effect, according to J. D. Power and Associates, a marketing information company. (It was also the third consecutive annual rise, the company said.)
As a result, an increasing number of borrowers who elected to lock in their rates at the end of last year but did not close on time must now arrange extensions of their lock-in agreements.
Borrowers could end up paying at least several hundred dollars in extension fees to lenders. Most lenders charge from 0.10 to 0.25 of a percentage point of the loan amount for a 15-week extension; for a $400,000 loan, that can amount to $400 to $1,000.
Of course, a number of other factors can also impede a closing -- especially considering the industry's tighter lending requirements. These range from lower credit scores, to delays in securing appraisal, to incomplete submission of documents verifying income.
Most rate locks last from 30 to 60 days, though some may be as short as 7 days or as long as 120.
Irene Amato, the owner of the A.S.A.P. Mortgage Corporation in Cortlandt Manor, N.Y., recommended that borrowers take out a lock for 60 to 90 days, especially for a refinancing -- which, she said, could take a little longer than a home purchase because of a backlog of applications.
Another big hurdle for borrowers is navigating a crazy quilt of lock-in policies from different lenders. Some may require that a borrower have a specific property chosen, for instance, while others may not.
''EVERY lender is different,'' said Jim Guerriero, the branch owner of First Lenders Mortgage, a mortgage broker in Middletown, N.J.
Some lenders will offer 60-day lock-ins free of charge, while others may charge ''points'' -- or fractions thereof -- based on the size of the loan, which could amount to several thousand dollars. (A point is equal to 1 percent of the loan amount.)
If your credit score plummets after you've signed a rate lock, lenders in some cases might rescind the lock. And some rate locks have buried in their fine print a caveat that a rate can in fact rise a quarter of a percentage point or so and still be considered applicable to the borrower.
''All I can say,'' Ms. Amato said, ''is get everything in writing -- every last detail.''
The Federal Reserve recommends having a real estate lawyer review a rate-lock agreement before you sign one. It has a consumer guide available at its Web site.
CHART: INDEX FOR ADJUSTABLE RATE MORTGAGES: 1-year Treasury rate (Source: HSH Associates)
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