When you are promised a "rate lock" from a lender, it means that you are guaranteed to keep a set interest rate for a determined period while you work on the application process. This ensures that your interest rate cannot rise as you are working through the application process.
Rate lock periods can be various lengths of time, anywhere from fifteen to sixty days, with the longer spans usually costing more. A lending institution will agree to hold an interest rate and points for a longer span of time, say sixty days, but in exchange, the rate (and sometimes points) will be higher than that of a rate lock of fewer days.
In addition to choosing the shorter lock period, there are other ways you may be able to get the lowest rate. The larger the down payment, the lower the rate will be, as you will have more equity from the start. You can pay points to improve your interest rate over the loan term, meaning you pay more up front. One strategy that makes financial sense for some is to pay points to reduce the interest rate over the term of the loan. You are paying more initially, but you will come out ahead, especially if you keep the loan for a long time.
Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.