What is a "rate lock period"?

Freezing the Rate

A rate "lock" or "commitment" is a promise from the lender to set a particular interest rate and a particular number of points for you for a specified period while your application is processed. This ensures that your interest rate won't go up while you are going through the application process.

Although there are several lengths of rate lock periods (from 15 to 60 days), the extended spans are typically more expensive. The lender may agree to freeze an interest rate and points for a longer span of time, like 60 days, but in exchange, the rate (and sometimes points) will be more than that of a rate lock of a shorter period.

More Ways to Get a Great Interest Rate

There are more ways to get a lower rate, besides agreeing to a shorter rate lock period. A bigger down payment will get you a better interest rate, because you'll be starting out with more equity. You might choose to pay points to bring down your rate for the life of the loan, meaning you pay more initially. One strategy that makes financial sense for many people is to pay points to bring the rate down over the term of the loan. You pay more initially, but you'll save money in the long run.

At American Commerce Mortgage, we answer questions about this process every day. Call us: 714-970-9700.

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