What is a "rate lock period"?
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Locking It In
When you are offered a "rate lock" from a lender, it means that you are guaranteed to keep a set interest rate for a determined period for your application process. This means your interest rate will not rise during the application process.
Although there are various lengths of rate lock periods (from 15 to 60 days), the longer ones are typically more expensive. The lender may agree to lock in an interest rate and points for a longer period, like sixty days, but in exchange, the rate (and sometimes points) will be more than that of a rate lock of fewer days.
Other Interest Saving Strategies
There are other ways to get a reduced rate, besides opting for a shorter rate lock period. The larger down payment you pay, the better the rate will be, since you will be entering the loan with more equity. You might opt to pay points to lower your interest rate for the loan term, 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 are paying more initially, but you'll save money, especially if you keep the loan for a long time.
At Primary Residential Mortgage Inc., we answer questions about this process every day. Call us: 540-433-6611.
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