"Rate Lock" and other Ways to Get a Lower Interest Rate
Freezing the Rate
When you're promised a "rate lock" from a lender, it means that you are guaranteed to get a certain interest rate for a certain number of days for the application process. This saves you from going through your entire application process and finding out at the end that the interest rate has gotten higher.
Rate lock periods can be various lengths of time, anywhere from fifteen to sixty days, with the longer period usually costing more. You can get a longer period for your lock, but in making this choice, will probably have a higher interest rate than you would with a shorter period
More Ways to Save on Interest
In addition to opting for a shorter lock period, there are several ways you are able to score the lowest rate. A larger down payment will result in a better interest rate, because you'll have a good amount of equity from the beginning. You can pay points to improve your interest rate over the loan term, meaning you pay more up front. One strategy that makes financial sense for many people is to pay points to improve the interest rate over the life of the loan. You pay more initially, but you will save money, especially if you keep the loan for a long time.
At Pioneer Mortgage Corp, we answer questions about this process every day. Call us at 781-245-4924.