"Rate Lock" and other Ways to Get a Lower Interest Rate
Locking in your Interest Rate
When you are promised a "rate lock" from your lender, it means that you are guaranteed to get a certain interest rate over a determined period while you work on your application process. This prevents you from going through your whole application process and learning at the end that your interest rate has gotten higher.
Although there are several lengths of rate lock periods (from 15 to 60 days), the longer ones are usually more expensive. You can get a longer period for your lock, but in making this choice, will likely have a higher rate than you would with a shorter period
Other Interest Saving Strategies
There are more ways to get a reduced rate, besides agreeing to a shorter rate lock period. A bigger down payment will result in a better interest rate, because you'll be starting out with a good deal of equity. You could choose to pay points to lower your rate for the loan term, meaning you pay more initially. One strategy that makes financial sense for some is to pay points to improve the interest rate over the term of the loan. You'll pay more up front, but you will come out ahead, especially if you don't refinance early.
At Real Property Finance, we answer questions about this process every day. Call us at 310-379-5997.
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