What is a "rate lock period"?
Freezing the Rate
When you're promised a "rate lock" from the lender, it means that you are guaranteed to get a specific interest rate over a certain number of days for the application process. This saves you from going through your whole application process and discovering at the end that your interest rate has risen higher.
Rate lock periods can be various lengths of time, anywhere from fifteen to sixty days, with the longer ones typically costing more. A lending institution will agree to lock in an interest rate and points for a longer period, like 60 days, but in exchange, the rate (and sometimes points) will be more than with a rate lock of a shorter period.
More Ways to Get a Great Interest Rate
There are more ways to get a reduced rate, in addition to opting for a shorter rate lock period. The bigger down payment you can make, the better your interest rate will be, as you will have more equity from the start. You can pay points to reduce your rate over the loan term, meaning you pay more initially. One strategy that is a good option for some is to pay points to bring the rate down over the life of the loan. You are paying more initially, but you will save money in the long run.
At Carter Financial Solutions, we answer questions about this process every day. Call us at 866-840-8745 x2.