What is a "rate lock period"?

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 certain period of time during your application process. This keeps you from working through your whole application process and learning at the end that your interest rate has gone up.

While there may be a choice of rate lock periods (from 15 to 60 days), the extended spans are generally more expensive. The lender may agree to lock in an interest rate and points for a longer span of time, such as sixty days, but in exchange, the rate (and sometimes points) will be more than with a rate lock of a shorter period.

Other Interest Saving Strategies

In addition to going with a shorter rate lock period, there are more ways you can get the best rate. A larger down payment will get you a lower interest rate, since you will be starting out with a good deal of equity. You might opt to pay points to improve your interest rate over the life of the loan, meaning you pay more initially. One strategy that makes financial sense for many people is to pay points to bring the rate down over the term of the loan. You are paying more up front, but you will come out ahead, especially if you keep the loan for a long time.

At U.S.A. Lending, Inc., we answer questions about this process every day. Give us a call at 305-967-7200.