"Rate Lock" and other Ways to Get a Lower Interest Rate
What is a Rate Lock?
When you're promised a "rate lock" from a lender, it means that you are guaranteed to keep a certain interest rate for a determined period for your application process. This saves you from getting through your entire application process and discovering at the end that your interest rate has gone up.
Although there are various lengths of rate lock periods (from 15 to 60 days), the longer spans are typically more expensive. The lending institution can agree to hold an interest rate and points for a longer period, like 60 days, but in exchange, the rate (and sometimes points) will be higher than with a rate lock of a shorter period.
More Ways to Get a Great Interest Rate
There are more ways to get a reduced rate, besides agreeing to a shorter rate lock period. A larger down payment will get you a better interest rate, because you are starting out with a good deal of equity. You can pay points to reduce your rate over the loan term, meaning you pay more up front. One strategy that makes financial sense for some is to pay points to reduce the interest rate over the term of the loan. You'll pay more initially, but you'll come out ahead in the long run.
At Crown Mortgage, we answer questions about this process every day. Give us a call at (434) 975-5626.
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