Nationwide Mortgage Licensing System (NMLS) Practice Exam

What is typically not included in a lock-in agreement?

1. Expiration date

2. APR

3. Lock-in fee

4. Interest rate

The correct answer is: APR

A lock-in agreement is a contract between a borrower and a lender that guarantees a specific interest rate and loan terms for a set period, protecting the borrower from interest rate fluctuations. Typically, these agreements outline critical elements such as the interest rate being locked, the expiration date of the lock period, and any associated fees like a lock-in fee. The Annual Percentage Rate (APR) represents the total cost of borrowing on an annual basis, including interest and fees, expressed as a percentage. However, the APR is generally not included in lock-in agreements. Instead, these agreements focus on the specific interest rate that will be applied during the lock-in period. By emphasizing the interest rate lock and the terms under which it is set, the lock-in agreement allows borrowers to have certainty about their loan costs for the duration of the lock. The inclusion of the expiration date and the possibility of a lock-in fee is standard, as these features help define the parameters of the agreement and the implications of the borrowing decision.