Getting a Low Interest Rate

Locking in your Interest Rate

A rate "lock" or "commitment" is a lender's promise to lock in a specific interest rate and a particular number of points for you for a certain period of time while your application is processed. This means your interest rate cannot go up during the application process.

Rate lock periods can be various lengths of time, between fifteen to sixty days, with the longer ones typically costing more. A lender will agree to freeze an interest rate and points for a longer span of time, say sixty days, but in exchange, the rate (and sometimes points) will be higher than that of a rate lock of a shorter period.

More Ways to Save on Interest

In addition to opting for a shorter lock period, there are several ways you can score the best rate. A bigger down payment will give you a reduced interest rate, because you'll have a good amount of equity at the start. You might choose to pay points to lower your rate for the loan term, meaning you pay more initially. One strategy that makes financial sense for some is to pay points to improve the rate over the term of the loan. You will pay more up front, but you will come out ahead, especially if you keep the loan for the full term.

At Chris Caggiano - Grand Oaks Funding, LLC, we answer questions about this process every day. Give us a call at (718) 477-4405.

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