"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 freeze a particular interest rate and a certain number of points for you for a certain period while your application is processed. This keeps you from getting through your entire application process and learning at the end that your 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 lending institution will agree to freeze 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 that of a rate lock of a shorter period.

Other Interest Saving Strategies

In addition to going with a shorter lock period, there are other ways you can score the best rate. The bigger down payment you can make, the better your interest rate will be, as you will be entering the loan with more equity. You can pay points to reduce your rate for the life of the loan, meaning you pay more up front. One strategy that is a good option for many people is to pay points to bring the rate down over the life of the loan. You are paying more initially, but you'll come out ahead, especially if you don't refinance early.

Signature Mortgage of Indiana can walk you through the pitfalls of getting a mortgage. Call us at 812-945-4400.

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