"Rate Lock" and other Ways to Get a Lower Interest Rate
What is a Rate Lock?
A rate "lock" or "commitment" is a lender's promise to hold a particular interest rate and a certain number of points for you for a specified period of time while your application is processed. This ensures that your interest rate cannot get higher during the application process.
Rate lock periods can be various lengths of time, between fifteen to sixty days, with the longer spans typically costing more. A lending institution will agree to hold 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 higher than that of a rate lock of fewer days.
Additional Ways to Save on Interest
There are other ways to get a reduced rate, in addition to agreeing to a shorter rate lock period. The more the down payment, the better the rate will be, since you will have more equity from the start. You can pay points to lower your rate for 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 are paying more initially, but you'll save money in the long run.
Longhorn Mortgage can walk you through the pitfalls of getting a mortgage. Call us at 512-302-9410.
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