What is a "rate lock period"?
Freezing the Rate
A rate "lock" or "commitment" is a promise from the lender to freeze a specific interest rate and a certain number of points for you for a specified period of time during your application process. This ensures that your interest rate will not grow during the application process.
Although there might be a choice of rate lock periods (from 15 to 60 days), the extended ones are usually more expensive. You can get a longer period for your lock, but in choosing this option, will most likely have a higher rate than you would with a shorter span of time
Other Ways to Save on Interest
In addition to going with the shorter lock period, there are other ways you are able to get the best rate. A bigger down payment will get you a lower interest rate, because you will have more equity from the beginning. You can pay points to bring down your rate for the term of the loan, meaning you pay more up front. One strategy that makes financial sense for many people is to pay points to reduce the rate over the term of the loan. You will pay more up front, but you'll come out ahead, especially if you keep the loan for the full term.
At Prime Capital Mortgage Corp, we answer questions about this process every day. Give us a call: 248-644-1200.
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