What is a Rate Lock?
A rate “lock” or “commitment” is a lender’s promise to freeze a particular interest rate and a certain number of points for you for a specified period of time while your application is processed. This means your interest rate will not grow during the application process.
While there are various lengths of rate lock periods (from 15 to 60 days), the extended ones are usually more expensive. You can get a longer period for your lock, but in making this choice, will most likely have a higher interest rate than you would with a shorter span of time.
When to Get a Mortgage Rate Lock
Buyers can apply for a rate lock after the initial loan approval. However, most people tend to wait until they have a contract. Buyers wait because they often don’t know how long it will take them to find a home or have the seller accept their offer. Locking in too early means that the buyer might miss a better rate. They might also have to pay for a lock extension in case it expires.
More Ways to Get a Great Interest Rate
In addition to opting for the shorter rate lock period, there are more ways you are able to attain the lowest rate. The more the down payment, the smaller the rate will be, as you will be starting with more equity. You can pay points to reduce your rate for the term of the loan, meaning you pay more up front. One strategy that is a good option for many people is to pay points to bring the rate down over the life of the loan. You’ll pay more initially, but you’ll save money in the end. Read our “Daily Rate Lock Advisory” to get more information.