What is a "rate lock period"?
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Locking in your Interest Rate
When you are offered a "rate lock" from a lender, it means that you are guaranteed to keep a specific interest rate over a certain number of days for the application process. This protects you from getting through your entire application process and learning at the end that your interest rate has risen higher.
While there are several lengths of rate lock periods (from 15 to 60 days), the extended ones are generally more expensive. A lending institution will agree to freeze an interest rate and points for a longer span of time, say 60 days, but in exchange, the rate (and sometimes points) will be more than with a rate lock of fewer days.
Other Interest Saving Strategies
There are other ways to get a good rate, in addition to going with a shorter rate lock period. The larger the down payment, the better your interest rate will be, as you will have more equity from the beginning. You may opt to pay points to improve your interest rate for the term of the loan, meaning you pay more initially. To many people, this makes sense and is a good deal.
At Community Mortgage, LLC (NMLS: #224143), we answer questions about this process every day. Give us a call at (816) 595-0664.