Getting a Low Interest Rate
Freezing the Rate
A rate "lock" or "commitment" is a promise from the lender to set a particular interest rate and a certain number of points for you for a certain period while your application is processed. This means your interest rate can't grow during the application process.
Although there can be a choice of rate lock periods (from 15 to 60 days), the extended ones are generally more expensive. A lender can agree to hold an interest rate and points for a longer span of time, like sixty days, but in exchange, the rate (and sometimes points) will be higher 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 better rate, in addition to agreeing to a shorter rate lock period. A larger down payment will get you a reduced interest rate, because you'll have a good amount of equity from the beginning. You can pay points to reduce your rate for the loan term, meaning you pay more initially. One strategy that makes financial sense for some is to pay points to bring the rate down over the term of the loan. You will pay more up front, but you will come out ahead, especially if you keep the loan for a long time.
At Crown Mortgage, we answer questions about this process every day. Call us: (434) 975-5626.
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