Getting a Low Interest Rate
Freezing the Rate
When you're promised a "rate lock" from your lender, it means that you are guaranteed to keep a specific interest rate for a determined period for the application process. This prevents you from going through your whole application process and discovering at the end that the interest rate has risen higher.
While there may be a choice of rate lock periods (from 15 to 60 days), the extended spans are typically more expensive. A lender will agree to hold an interest rate and points for a longer span of time, say sixty days, but in exchange, the rate (and sometimes points) will be higher than that of a rate lock of fewer days.
More Ways to Save on Interest
There are other ways to get a low rate, besides going with a shorter rate lock period. The larger the down payment, the smaller the interest rate will be, because you will be starting with more equity. You may opt to pay points to lower your interest rate for 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 reduce the interest rate over the life of the loan. You'll pay more initially, but you'll save money in the long run.
At Savers Home Loans, we answer questions about this process every day. Give us a call: (800) 974-0509.