What is a "rate lock period"?

What is a Rate Lock?

When you are promised a "rate lock" from a lender, it means that you are guaranteed to get a particular interest rate over a determined period while you work on your application process. This means your interest rate cannot get higher while you are working through the application process.

While there can be a choice of rate lock periods (from 15 to 60 days), the extended spans are generally more expensive. A lender may agree to hold an interest rate and points for a longer period, say sixty days, but in exchange, the rate (and sometimes points) will be higher than with a rate lock of a shorter period.

Other Interest Saving Strategies

In addition to choosing the shorter rate lock period, there are more ways you are able to get the lowest rate. A larger down payment will give you a lower interest rate, since you'll have a good deal of equity at the start. You can pay points to reduce your interest rate for the term of the loan, meaning you pay more initially. One strategy that is a good option for many people is to pay points to improve the rate over the life of the loan. You are paying more initially, but you will save money in the long run.

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

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