What is a "rate lock period"?

A rate lock or a rate commitment is a lender's promise to hold a certain interest rate for a specified period of time while your application is processed. 

A rate lock period can vary in length, and longer ones usually cost more. A lender may agree to lock your interest rate for a longer period, say 60 days, but in exchange the rate and maybe points are higher than with a shorter rate lock period, for example.

How can you make sure your rate is low?

In addition to opting for a shorter rate lock period, there are some other ways to get a lower rate.  A larger down payment will result in a lower interest rate than a smaller one, because you're starting out with more equity. You can pay points to lower your rate over the life of the loan, but that means you pay more up front. A shorter loan term, for example a 15 year term vs. a 30 year term, will generally have a lower interest rate.  For many people, this makes sense and is a good deal.

Closing costs are generally paid for by the borrower at closing or sometimes by the property seller, but a person may also have the option to finance their closing costs. Paying closing costs when the loan closes will reduce your interest rate.

Finally, the interest rate a lender is willing to offer you depends on factors including, but not limited to, your credit score, your debt-to-income ratio and your amount of down payment or home equity.  If you have superior credit, low loan to value, and your income far exceeds your debt obligations, you may qualify for a lower rate.

Not sure of your options? Discuss your home financing needs with Amabassador Funding LLC mortgage professionals and let our ideas and experience work for you!