Getting a Low Interest Rate

What is a Rate Lock?

When you are offered a "rate lock" from your lender, it means that you are guaranteed to get a specific interest rate for a determined period while you work on your application process. This ensures that your interest rate will not grow during the application process.

Rate lock periods can be various lengths of time, anywhere from 15 to 60 days, with the longer period generally costing more. A lender will agree to hold an interest rate and points for a longer span of time, like sixty days, but in exchange, the rate (and sometimes points) will be higher than that of a rate lock of fewer days.

Other Interest Saving Strategies

There are other ways to get a better rate, in addition to opting for a shorter rate lock period. A bigger down payment will result in a reduced interest rate, because you'll have more equity from the beginning. You can pay points to bring down your interest rate over the term of the loan, meaning you pay more initially. One strategy that is a good option for some is to pay points to reduce the rate over the term of the loan. You are paying more up front, but you will save money, especially if you keep the loan for a long time.

The Reen Team at American Pacific Mortgage can walk you through the pitfalls of getting a mortgage. Call us: (408) 626-1879.

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