"Rate Lock" and other Ways to Get a Lower Interest Rate
Locking It In
A rate "lock" or "commitment" is a lender's promise to set a certain interest rate and a specific number of points for you for a certain period while your application is processed. This means your interest rate will not grow while you are going through the application process.
Although there are several lengths of rate lock periods (from 15 to 60 days), the extended ones are usually more expensive. The lender may agree to freeze an interest rate and points for a longer span of time, like sixty days, but in exchange, the rate (and sometimes points) will be more than that of a rate lock of fewer days.
Other Ways to Save on Interest
In addition to going with the shorter rate lock period, there are several ways you can score the lowest rate. A larger down payment will result in a better interest rate, because you'll have more equity from the beginning. You might opt to pay points to bring down your interest rate for the loan term, meaning you pay more initially. One strategy that is a good option for many people is to pay points to reduce the interest rate over the life of the loan. You'll pay more up front, but you'll come out ahead, especially if you don't refinance early.
At Coastal Mortgage Corp., we answer questions about this process every day. Call us: 504-866-5626.
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