When you are promised a "rate lock" from your lender, it means that you are guaranteed to keep a specific interest rate over a certain number of days while you work on the application process. This prevents you from working through your entire application process and learning at the end that the interest rate has risen higher.
Rate lock periods can be various lengths of time, anywhere from fifteen to sixty days, with the longer spans generally costing more. A lender will agree to lock in an interest rate and points for a longer span of time, such as 60 days, but in exchange, the rate (and sometimes points) will be more than with a rate lock of fewer days.
There are other ways to get a better rate, besides choosing a shorter rate lock period. The larger down payment you can pay, the better your interest rate will be, since you will have more equity from the beginning. You can pay points to bring down your rate over the term 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 life of the loan. You'll pay more initially, but you'll save money, especially if you don't refinance early.
Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.