Getting a Low Interest Rate
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 for a certain number of days for your application process. This saves you from going through your whole application process and discovering at the end that your interest rate has risen higher.
Rate lock periods can vary in length, between fifteen to sixty days, with the longer ones typically costing more. A lending institution may agree to lock in 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 more than that of a rate lock of fewer days.
More Ways to Get a Great Interest Rate
There are other ways to get a good rate, in addition to agreeing to a shorter rate lock period. The larger the down payment, the lower your interest rate will be, as you will be starting with more equity. You can pay points to reduce your interest rate for the term of the loan, meaning you pay more up front. One strategy that is a good option for some is to pay points to improve the interest rate over the life of the loan. You pay more up front, but you will come out ahead, especially if you keep the loan for the full term.
At Harbor View Lending* a DBA of Megastar Financial, we answer questions about this process every day. Give us a call at (207) 571-8034.