"Rate Lock" and other Ways to Get a Lower Interest Rate
What is a Rate Lock?
A rate "lock" or "commitment" is a lender's promise to freeze a certain interest rate and a particular number of points for you for a specified period of time while your application is processed. This means your interest rate won't grow during the application process.
Rate lock periods can be various lengths of time, between 15 to 60 days, with the longer spans generally costing more. The lending institution will agree to freeze an interest rate and points for a longer period, say sixty days, but in exchange, the rate (and sometimes points) will be higher than that of a rate lock of fewer days.
Other Ways to Save on Interest
There are more ways to get a lower rate, in addition to agreeing to a shorter rate lock period. The more the down payment, the better the rate will be, because you will have more equity from the start. You can pay points to lower your interest rate for the loan term, meaning you pay more up front. One strategy that makes financial sense for some is to pay points to reduce the rate over the life of the loan. You'll pay more initially, but you will come out ahead, especially if you keep the loan for a long time.
Carter Financial Solutions can walk you through the pitfalls of getting a mortgage. Call us at 866-840-8745 x2.