"Rate Lock" and other Ways to Get a Lower Interest Rate
Locking in your Interest Rate
A rate "lock" or "commitment" is a promise from the lender to hold a specific interest rate and a specific number of points for you for a certain period of time while your application is processed. This ensures that your interest rate won't rise during the application process.
While there are several lengths of rate lock periods (from 15 to 60 days), the longer spans are usually more expensive. A lending institution may agree to hold an interest rate and points for a longer period, such as 60 days, but in exchange, the rate (and sometimes points) will be higher than with a rate lock of a shorter period.
More Ways to Save on Interest
There are more ways to get a good rate, in addition to agreeing to a shorter rate lock period. The larger down payment you make, the lower the interest rate will be, as you will have more equity from the start. You can pay points to improve your rate for the term of the loan, 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'll pay more up front, but you will save money in the end.
At Trustin Mortgage, LLC, we answer questions about this process every day. Call us at (302) 765-8089.
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