What is a "rate lock period"?

Locking It In

A rate "lock" or "commitment" is a promise from the lender to set a specific interest rate and a certain 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 your interest rate has gotten higher.

Although there are various lengths of rate lock periods (from 15 to 60 days), the longer ones are typically more expensive. The lending institution can agree to hold an interest rate and points for a longer period, say 60 days, but in exchange, the rate (and sometimes points) will be more than that of a rate lock of a shorter period.

Other Ways to Save on Interest

There are other ways to get a better rate, besides opting for a shorter rate lock period. A bigger down payment will result in a lower interest rate, since you will have more equity from the beginning. You can pay points to lower your rate over the loan term, meaning you pay more up front. One strategy that is a good option for some is to pay points to bring the rate down over the term of the loan. You'll pay 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 3172889434.

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Strongsville, OH 44136