Your preapproval letter says you can borrow up to $425,000 at 6.375%. You tour nine houses, win a bidding war, and three weeks before closing your loan officer calls with news: the rate is now 6.75%. Nothing about your finances changed. So what happened?
Can mortgage rates change after preapproval? They can, and it happens more often than most buyers expect. A preapproval is not a rate commitment, and until you have signed a lock agreement, your pricing is still tied to a market that moves every business day.
What a Preapproval Actually Promises
A preapproval letter is a lender’s estimate of how much it is willing to lend you, based on a snapshot of your credit score, income, debts, and cash reserves. It answers one question: are you a reasonable risk at this loan size?
It does not answer what your rate will be on closing day. The rate printed on that letter, if there is one, is usually just the lender’s pricing on the day the letter was generated. Think of it as a placeholder, not a guarantee.
The commitment you are looking for is a rate lock: a written agreement, usually a one- or two-page Lock-In Agreement, that fixes your interest rate and points for a set number of days. That document is what protects you. A preapproval letter is not.
Three Reasons Your Rate Changes Before Closing
1. You never locked the rate
Plenty of buyers assume the preapproval rate travels with them to closing. It does not. If you have not signed a lock, your rate floats. On a day when the 10-year Treasury yield moves 0.15%, mortgage pricing can shift by an eighth of a point or more. Over a 45-day escrow in a volatile market, half a point of drift is entirely possible.
2. Your lock expired
A 30-day lock cannot cover a 50-day escrow. When the lock runs out before closing, the lender either reprices you at the current market rate or charges a lock extension fee. Those extensions typically cost somewhere between an eighth and a quarter of a point. On a $400,000 loan, an eighth of a point is $500, paid for a week or two of extra coverage.
3. Something in your file changed
Rate locks protect you from the market, not from yourself. Lenders re-verify your file shortly before closing, and any material change can push you into a different pricing tier. The usual suspects:
- A new credit card, car loan, or financed furniture purchase that raises your debt-to-income ratio
- A credit score drop of 20 points or so, which can trigger a pricing adjustment
- A job change, especially moving from salaried to commission-based income
- Switching loan programs, like going from conventional to FHA mid-process
- A property that appraises lower than expected, changing your loan-to-value ratio
- Changing the occupancy type, such as buying as an investment instead of a primary home
Any one of those can bump your rate a quarter point or more, even with a lock in hand. That is why loan officers repeat the same advice every time: do not open new credit, do not change jobs, and do not make large unexplained deposits until the keys are in your hand.
Float-Down Clauses and When Rates Fall
Rate movement cuts both ways. If the market improves before closing, some lenders let you take the lower rate through a float-down provision. These usually trigger only if rates drop by a set amount, commonly 0.25%, and they often cost a fee of around half a point. Ask whether your lender offers one and what it takes to use it. Many do not, so it is worth knowing before you get emotionally invested.
If you are already locked and rates fall sharply, you can sometimes renegotiate. A lender is not legally required to reprice, but a competing quote is a decent conversation starter. Some buyers walk away and restart with a new lender, which costs time and another appraisal. That is rarely worth it for an eighth of a point.
What a Higher Rate Really Costs You
Numbers put this in perspective. On a $400,000 loan, the difference between 6.5% and 7.0% is roughly $130 a month, or about $47,000 over 30 years. That is real money, but it is also often manageable in the moment.
A few ways to absorb the change:
- Buy the rate down. One discount point costs 1% of the loan and typically reduces the rate by about 0.25%. On $400,000, that is $4,000 upfront to save roughly $65 a month, a break-even of about five years.
- Ask for a lender credit. Many lenders will cover closing costs in exchange for a slightly higher rate. Useful if cash is tight.
- Negotiate with the seller. If the appraisal came in low or the rate moved, a seller credit toward closing costs can offset the damage.
- Plan to refinance. If you expect to stay in the home long enough, a future refinance can reset the rate. Just budget for closing costs twice.
How to Stop Your Preapproval Rate From Slipping
Most rate surprises are avoidable with a bit of legwork. The buyers who get burned are usually the ones who treated the preapproval letter as the finish line.
- Ask for a lock in writing the day you go under contract, and confirm the expiration date covers your closing date plus a buffer.
- Choose a lock period that spans your full escrow. A 60-day lock usually costs a little more than a 30-day, but an extension often costs more than the difference.
- Freeze your credit activity. No new accounts, no balance jumps, no cosigning for anyone.
- Keep your documentation current. Pay stubs and bank statements older than 60 days can trigger re-underwriting.
- Get quotes from at least three lenders on the same day, so you are comparing real numbers rather than rates from three different weeks.
The Questions to Ask Before You Sign Anything
Your loan officer should be able to answer these without hedging. What is the lock period, and what happens if we close late? Does the lock include a float-down, and what does it cost? Is this rate based on my actual credit profile or an assumed one? What would change it?
Get the answers in writing. A rate quote over the phone is a conversation; a signed lock agreement is a contract. If a lender will not put terms in writing before you commit, that tells you something important about how the rest of the process will go.
One more thing worth internalizing: your preapproval amount and your comfort zone are not the same number. A lender might approve you for $425,000 at 6.75%, but if that payment stretches you thin, a smaller loan at a rate you can absorb is the better outcome. Rates will move. Your budget should have room to move with them.