"Rate Lock" and other Ways to Get a Lower Interest Rate
Freezing the Rate
A rate "lock" or "commitment" is a lender's promise to hold a certain interest rate and a specific number of points for you for a certain period during your application process. This saves you from working through your entire application process and finding out at the end that your interest rate has gotten higher.
Rate lock periods can vary in length, between 15 to 60 days, with the longer spans typically costing more. A lending institution can agree to lock in an interest rate and points for a longer span of time, like sixty days, but in exchange, the rate (and sometimes points) will be more than with a rate lock of fewer days.
Additional Ways to Save on Interest
There are more ways to get a low rate, in addition to choosing a shorter rate lock period. A larger down payment will result in a better interest rate, since you will be starting out with a good deal of equity. You can pay points to improve your rate over the loan term, meaning you pay more initially. One strategy that is a good option for some is to pay points to improve the rate over the term of the loan. You'll pay more initially, but you'll come out ahead, especially if you keep the loan for a long time.
American First Bancorp, Inc. can answer questions about rate lock periods & many others. Give us a call at 330-492-7757.