What is a "rate lock period"?
Freezing the Rate
A rate "lock" or "commitment" is a promise from the lender to hold a particular interest rate and a certain number of points for you for a specified period during your application process. This keeps you from going through your entire application process and learning at the end that your interest rate has risen higher.
Although there might be a choice of rate lock periods (from 15 to 60 days), the longer spans are generally more expensive. A lending institution may agree to lock in an interest rate and points for a longer span of time, such as sixty days, but in exchange, the rate (and sometimes points) will be more than with a rate lock of a shorter period.
Other Ways to Save on Interest
In addition to choosing a shorter lock period, there are more ways you may be able to attain the best rate. A bigger down payment will result in a lower interest rate, since you'll be starting out with more equity. You may choose to pay points to reduce your rate for the term of the loan, meaning you pay more up front. One strategy that is a good option for some is to pay points to bring the rate down over the term of the loan. You are paying more up front, but you'll save money in the long run.
At Real Property Finance, we answer questions about this process every day. Give us a call: 310-379-5997.
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