What is a "rate lock period"?

Freezing the Rate

A rate "lock" or "commitment" is a promise from the lender to lock in a specific interest rate and a specific number of points for you for a certain period of time during your application process. This prevents you from going through your whole application process and discovering at the end that the interest rate has gotten higher.

Although there might be a choice of rate lock periods (from 15 to 60 days), the longer spans are usually more expensive. The lending institution will agree to hold an interest rate and points for a longer span of time, say 60 days, but in exchange, the rate (and sometimes points) will be more than that of a rate lock of a shorter period.

Additional Ways to Save on Interest

There are other ways to get a good rate, besides choosing a shorter rate lock period. The larger down payment you can make, the smaller your rate will be, as you will have more equity from the beginning. You can pay points to bring down your rate for the life of the loan, meaning you pay more initially. To a lot of people, this makes sense and is a good deal..

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

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