What is a "rate lock period"?
Freezing the Rate
A rate "lock" or "commitment" is a lender's promise to hold a certain interest rate and a certain number of points for you for a specified period during your application process. This protects you from working through your entire application process and finding out at the end that the interest rate has gotten higher.
Rate lock periods can vary in length, anywhere from 15 to 60 days, with the longer ones generally costing more. A lender may agree to freeze an interest rate and points for a longer period, like 60 days, but in exchange, the rate (and sometimes points) will be more than that of a rate lock of a shorter period.
Other Interest Saving Strategies
In addition to choosing the shorter lock period, there are other ways you are able to get the best rate. A bigger down payment will give you a reduced interest rate, since you'll be starting out with a good deal of equity. You could opt to pay points to lower your interest rate over the loan term, meaning you pay more initially. One strategy that makes financial sense for some is to pay points to bring the rate down over the term of the loan. You are paying more initially, but you will come out ahead, especially if you keep the loan for the full term.
Executive Lending Group, LLC can walk you through the pitfalls of getting a mortgage. Call us: (816) 525-8000 & (81.
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