Locking in your mortgage rate at the start of the application process can save you a great deal of money. Initially, when you apply for a mortgage loan, you are given the option whether to “lock in” early or to “float” your rate.

What do these terms mean? In simple terms, locking in your mortgage rate means that you agree to set your mortgage rate on a fixed status for a certain amount of time. This way, it won’t be affected by the unpredictable rise or drop of interest rates in the housing market. There are lock-ins available for as long as 60 days.

On the other hand, when you float your rate, you choose to delay on fixing your mortgage rate.

A lock-in is a good thing precisely because the interest rate is fixed. It gives you immunity when market-wide interest rates suddenly shoot up, which is something that happens quite often in today’s very unstable housing market. Think of it as a shield against economic uncertainties.

But you need to do it fast. You must decide to lock-in right away.

Consider this: real estate analysts predict that there will be a 7 percent interest rate hike by the end of 2008. Add to that the looming inflation and investors’ growing caution towards purchasing mortgage securities, which may just push interest rates higher and cause more problems for borrowers. So if you don’t want to pay high interest rates in the future, or even while your application is being processed, it’s best to secure your mortgage rates now.

If you decide to lock in only after the application process—or “float your rate” in the industry parlance—you run the risk of being caught off-guard and unprotected against abrupt and steep rate hikes. You could end up paying so much more than what you bargained for.

So how do you “lock” it in?

It’s easy: just talk to your broker. Make sure that you have a contract or binder on a home. Get your broker to give you a commitment in writing.

Remember, the key factor in this whole thing is prompt action. Lock in as fast as you can and you can get yourself a great deal.