Locking your Rate

What is a "rate lock period"? How can you make sure your rate is low?

A rate lock or a rate commitment is a lender's promise to hold a certain interest rate and a certain number of points for you for a specified period of time. Locking the rate prevents you from going through your entire application process only to discover that the interest rate has moved up. Rate lock periods can vary in length with longer periods costing you more than shorter period of time.

There are many ways besides opting for a shorter rate lock period to get a lower rate. A larger down payment will result in a lower interest rate than a smaller one. The reason is you are starting out with more equity. You can pay points at the front end of your loan in order to lower your rate over the life of the loan. For many this makes sound fiscal sense.

Closing costs are fees paid by the lender, which the lender in turn charges you to close your loan. Many borrowers finance their closing costs as opposed to paying them at the time of their closing. If you are able to pay your closing costs when the loan closes you will reduce your interest rate.

Finally, the interest rate a lender is willing to offer you depends on your credit score and your income-to-debt ratio. If you have good credit and your income far exceeds your debt obligations, you will qualify for a lower rate.