"Rate Lock" and other Ways to Get a Lower Interest Rate
Freezing the Rate
A rate "lock" or "commitment" is a promise from the lender to set a certain interest rate and a certain number of points for you for a specified period of time during your application process. This means your interest rate will not grow during the application process.
Although there may be a choice of rate lock periods (from 15 to 60 days), the extended ones are generally more expensive. A lender can agree to hold an interest rate and points for a longer period, like sixty 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 better rate, besides choosing a shorter rate lock period. A bigger down payment will give you a lower interest rate, because you will be starting out with more equity. You can pay points to lower your rate for the loan term, meaning you pay more initially. One strategy that is a good option for many people is to pay points to improve the interest rate over the term of the loan. You pay more up front, but you will come out ahead, especially if you keep the loan for the full term.
American First Bancorp, Inc. can walk you through the pitfalls of getting a mortgage. Give us a call at 330-492-7757.