"Rate Lock" and other Ways to Get a Lower Interest Rate
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What is a Rate Lock?
A rate "lock" or "commitment" is a promise from the lender to set a specific interest rate and a specific number of points for you for a specified period of time while your application is processed. This saves you from getting 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 spans are generally more expensive. The lender can 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 higher than that of a rate lock of a shorter period.
Other Interest Saving Strategies
In addition to going with a shorter lock period, there are other ways you may be able to score the best rate. A larger down payment will give you a lower interest rate, since you will have a good deal of equity from the beginning. You may choose to pay points to reduce your rate for the life of the loan, meaning you pay more initially. To many people, this makes sense and is a good deal..
At First Funding, we answer questions about this process every day. Give us a call: (408) 540-0200.