"Rate Lock" and other Ways to Get a Lower Interest Rate
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Locking in your Interest Rate
When you're promised a "rate lock" from the lender, it means that you are guaranteed to keep a certain interest rate for a certain number of days while you work on the application process. This ensures that your interest rate cannot go up while you are going through the application process.
While there are various lengths of rate lock periods (from 15 to 60 days), the longer spans are generally more expensive. The lender will agree to freeze an interest rate and points for a longer period, like 60 days, but in exchange, the rate (and sometimes points) will be more than with a rate lock of a shorter period.
Other Interest Saving Strategies
There are more ways to get a low rate, besides choosing a shorter rate lock period. A bigger down payment will result in a better interest rate, because you will have more equity from the beginning. You may choose to pay points to lower your rate for the loan term, meaning you pay more initially. One strategy that makes financial sense 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 come out ahead in the end.
SMI Lending, Inc. can answer questions about rate lock periods and many others. Give us a call at (972) 818-0022.