Getting a Low Interest Rate

What is a Rate Lock?

A rate "lock" or "commitment" is a promise from the lender to hold a specific interest rate and a certain number of points for you for a certain period while your application is processed. This keeps you from going through your entire application process and learning at the end that your interest rate has risen higher.

Rate lock periods can vary in length, anywhere from 15 to 60 days, with the longer spans typically costing more. The lending institution will agree to freeze an interest rate and points for a longer period, say sixty days, but in exchange, the rate (and sometimes points) will be higher than with a rate lock of a shorter period.

More Ways to Get a Great Interest Rate

There are more ways to get a reduced rate, in addition to choosing a shorter rate lock period. The bigger down payment you make, the lower the interest rate will be, since you will have more equity from the beginning. You can pay points to reduce your rate for the loan term, meaning you pay more initially. 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'll pay more up front, but you will save money in the end.

At Capacity Lending, LLC, we answer questions about this process every day. Call us at 469-640-0400.

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