What does it mean to "lock in" an interest rate?

To "lock in" an interest rate refers to the practice of securing a specific interest rate for a predetermined period of time. This action protects the borrower from fluctuations in interest rates that could occur before the loan is finalized. When a borrower locks in a rate, they ensure that their mortgage payment calculation is based on the agreed-upon rate, regardless of any upward or downward movements in the market during the lock-in period.

This feature is particularly beneficial in a volatile interest rate environment where rates can change rapidly. Locking in a rate provides certainty to the borrower as they move through the loan application and approval processes. Once the loan closes within the lock period, the borrower will proceed with the secured rate, potentially leading to significant savings over the life of the loan if market rates increase.

The other options do not accurately describe the concept of locking in a rate, as they pertain to different aspects of the mortgage process.