What is a "rate lock period"?
What is a Rate Lock?
A rate "lock" or "commitment" is a lender's promise to set a specific interest rate and a certain number of points for you for a specified period of time while your application is processed. This saves you from working through your entire application process and finding out at the end that your interest rate has risen higher.
Although there can be a choice of rate lock periods (from 15 to 60 days), the extended ones are generally more expensive. The lender will agree to lock in 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
There are more ways to get a low rate, besides agreeing to a shorter rate lock period. A larger down payment will give you a reduced interest rate, because you'll have a good amount of equity from the beginning. You might opt to pay points to reduce your 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 improve the interest rate over the life of the loan. You'll pay more up front, but you will come out ahead, especially if you don't refinance early.
American First Bancorp, Inc. can walk you through the pitfalls of getting a mortgage. Call us: 330-492-7757.