Getting a Low Interest Rate
Locking It In
When you are offered a "rate lock" from the lender, it means that you are guaranteed to keep a specific interest rate over a certain number of days while you work on your application process. This prevents you from getting through your entire application process and discovering at the end that the interest rate has risen higher.
Rate lock periods can vary in length, between fifteen to sixty days, with the longer ones typically costing more. A lender will agree to lock in an interest rate and points for a longer period, say 60 days, but in exchange, the rate (and sometimes points) will be higher than that of a rate lock of a shorter period.
Additional Ways to Save on Interest
In addition to opting for the shorter lock period, there are more ways you can attain the best rate. A larger down payment will result in a lower interest rate, since you will have more equity from the beginning. You can pay points to bring down your interest rate over the loan term, meaning you pay more initially. One strategy that makes financial sense for many people is to pay points to reduce the interest rate over the life of the loan. You'll pay more up front, but you will save money in the end.
At Crown Mortgage, we answer questions about this process every day. Give us a call at (434) 975-5626.
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