What is a "rate lock period"?

What is a Rate Lock?

A rate "lock" or "commitment" is a promise from the lender to lock in a certain interest rate and a specific number of points for you for a specified period during your application process. This keeps you from working through your whole application process and learning at the end that your interest rate has gotten higher.

While there are various lengths of rate lock periods (from 15 to 60 days), the extended spans are usually more expensive. The lender will agree to freeze an interest rate and points for a longer span of time, such as 60 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 the shorter rate lock period, there are several ways you can score the best rate. The bigger the down payment, the smaller your interest rate will be, since you will be entering the loan with more equity. You could choose to pay points to lower your interest rate over the life of the loan, meaning you pay more up front. One strategy that is a good option for many people is to pay points to bring the rate down over the life of the loan. You will pay more up front, but you'll save money, especially if you don't refinance early.

Capacity Lending, LLC can walk you through the pitfalls of getting a mortgage. Call us at 469-640-0400.

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