"Rate Lock" and other Ways to Get a Lower Interest Rate
What is a Rate Lock?
A rate "lock" or "commitment" is a promise from the lender to freeze a specific interest rate and a particular number of points for you for a certain period while your application is processed. This keeps you from working through your whole application process and learning at the end that your interest rate has risen higher.
While there may be a choice of rate lock periods (from 15 to 60 days), the extended spans are typically more expensive. A lending institution may 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 more than that of a rate lock of a shorter period.
More Ways to Get a Great Interest Rate
There are other ways to get a lower rate, besides choosing a shorter rate lock period. The larger down payment you can make, the better your rate will be, as you will have more equity from the start. You can pay points to lower your rate over the term of the loan, 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 up front, but you'll save money in the end.
At New Millennium Mortgage Co. NMLS: 331173, we answer questions about this process every day. Give us a call: (941) 366-5800.
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