"Rate Lock" and other Ways to Get a Lower Interest Rate
What is a Rate Lock?
A rate "lock" or "commitment" is a promise from the lender to hold a certain interest rate and a particular number of points for you for a specified period of time during your application process. This saves you from getting through your entire application process and discovering at the end that the interest rate has gone up.
Rate lock periods can vary in length, between 15 to 60 days, with the longer spans usually costing more. A lender can agree to freeze an interest rate and points for a longer span of time, such as 60 days, but in exchange, the rate (and sometimes points) will be more than with a rate lock of a shorter period.
Other Ways to Save on Interest
There are more ways to get a reduced rate, in addition to going with a shorter rate lock period. The bigger the down payment, the better the interest rate will be, as you will have more equity from the start. You may opt to pay points to bring down your rate for the loan term, meaning you pay more up front. One strategy that makes financial sense for many people is to pay points to reduce the interest rate over the life of the loan. You'll pay more initially, but you will save money in the end.
U.S.A. Lending, Inc. can walk you through the pitfalls of getting a mortgage. Give us a call at 305-967-7200.