What is a "rate lock period"?

Freezing the Rate

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 certain period of time while your application is processed. This prevents 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 be various lengths of time, anywhere from 15 to 60 days, with the longer spans typically costing more. A lending institution will agree to lock in an interest rate and points for a longer period, say sixty days, but in exchange, the rate (and sometimes points) will be more than with a rate lock of fewer days.

Other Interest Saving Strategies

In addition to going with the shorter rate lock period, there are other ways you can score the lowest rate. A larger down payment will get you a better interest rate, since you will have a good deal of equity from the beginning. You can pay points to reduce your rate over the loan term, meaning you pay more up front. To a lot of people, this makes financial sense..

At The Reen Team at American Pacific Mortgage, we answer questions about this process every day. Call us at (408) 626-1879.

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