A rate "lock" or "commitment" is a lender's promise to set a particular interest rate and a particular number of points for you for a certain period of time while your application is processed. This prevents you from going through your whole application process and finding out at the end that your interest rate has risen higher.
Rate lock periods can be various lengths of time, between fifteen to sixty days, with the longer spans generally costing more. You can get a longer period for your lock, but in making this choice, will probably have a higher rate than you would have with a shorter span of time
There are more ways to get a reduced rate, in addition to opting for a shorter rate lock period. A larger down payment will get you a better interest rate, because you'll be starting out with more equity. You could opt to pay points to bring down your rate over the loan term, meaning you pay more up front. One strategy that makes financial sense for some is to pay points to improve the rate over the term of the loan. You'll pay more initially, but you will come out ahead, especially if you keep the loan for a long time.
Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.