A rate "lock" or "commitment" is a promise from the lender to set a particular interest rate and a certain number of points for you for a specified period of time during your application process. This means your interest rate can't get higher while you are going through the application process.
Rate lock periods can vary in length, anywhere from 15 to 60 days, with the longer period generally costing more. A lending institution may agree to freeze an interest rate and points for a longer span of time, such as sixty days, but in exchange, the rate (and sometimes points) will be higher than that of a rate lock of fewer days.
There are other ways to get a low rate, besides choosing a shorter rate lock period. The bigger down payment you can make, the smaller the rate will be, because you will have more equity from the beginning. You can pay points to reduce your interest rate for the loan term, 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'll pay more up front, but you'll save money in the end.
Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.