"Rate Lock" and other Ways to Get a Lower Interest Rate
Locking in your Interest Rate
When you are offered a "rate lock" from the lender, it means that you are guaranteed to get a particular interest rate for a determined period for the application process. This means your interest rate will not rise as you are working through the application process.
While there can be a choice of rate lock periods (from 15 to 60 days), the extended ones are typically more expensive. The lending institution may agree to hold an interest rate and points for a longer span of time, like 60 days, but in exchange, the rate (and sometimes points) will be higher than that of a rate lock of a shorter period.
Other Interest Saving Strategies
There are more ways to get a low rate, besides opting for a shorter rate lock period. A bigger down payment will result in a lower interest rate, since you're starting out with a good deal of equity. You may choose to pay points to reduce your rate for the loan term, meaning you pay more initially. One strategy that makes financial sense for many people is to pay points to bring the rate down over the life of the loan. You'll pay more up front, but you'll save money, especially if you don't refinance early.
At Crown Mortgage, we answer questions about this process every day. Call us: (434) 975-5626.
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