What is a "rate lock period"?
Locking in your Interest Rate
A rate "lock" or "commitment" is a promise from the lender to set a certain interest rate and a particular number of points for you for a specified period of time during your application process. This protects you from getting through your entire application process and discovering at the end that your interest rate has gotten higher.
While there can be a choice of rate lock periods (from 15 to 60 days), the extended spans are generally more expensive. A lender can agree to lock in an interest rate and points for a longer period, such as sixty days, but in exchange, the rate (and sometimes points) will be more than with a rate lock of a shorter period.
Additional Ways to Save on Interest
There are more ways to get a low rate, besides choosing a shorter rate lock period. The larger down payment you pay, the lower your rate will be, as you will be starting with more equity. You can pay points to bring down your interest rate over the life of the loan, meaning you pay more initially. One strategy that makes financial sense for many people is to pay points to reduce the rate over the life of the loan. You pay more initially, but you will come out ahead in the long run.
At Longhorn Mortgage, we answer questions about this process every day. Call us: 512-302-9410.
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