Getting a Low Interest Rate

Freezing the Rate

A rate "lock" or "commitment" is a lender's promise to freeze a certain interest rate and a certain number of points for you for a specified period of time during your application process. This ensures that your interest rate can't go up during the application process.

While there are several lengths of rate lock periods (from 15 to 60 days), the extended ones are usually more expensive. A lender will agree to hold an interest rate and points for a longer span of time, like sixty days, but in exchange, the rate (and sometimes points) will be higher than that of a rate lock of fewer days.

More Ways to Get a Great Interest Rate

There are other ways to get a low rate, in addition to agreeing to a shorter rate lock period. The bigger down payment you can make, the better your interest rate will be, as you will be starting with more equity. You could opt to pay points to improve your interest rate over the life of the loan, meaning you pay more up front. 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'll come out ahead, especially if you don't refinance early.

James M. Dix can walk you through the pitfalls of getting a mortgage. Give us a call at (317) 288-9434.

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