Getting a Low Interest Rate
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Freezing the Rate
A rate "lock" or "commitment" is a lender's promise to hold a specific interest rate and a certain number of points for you for a specified period of time while your application is processed. This ensures that your interest rate won't rise during the application process.
Rate lock periods can vary in length, anywhere from fifteen to sixty days, with the longer ones generally costing more. The lender will agree to lock in an interest rate and points for a longer span of time, such as 60 days, but in exchange, the rate (and sometimes points) will be higher than with a rate lock of a shorter period.
More Ways to Get a Great Interest Rate
In addition to going with a shorter lock period, there are several ways you can score the best rate. A bigger down payment will give you a lower interest rate, since you will be starting out with more equity. You may choose to pay points to reduce your interest rate for the loan term, meaning you pay more up front. One strategy that is a good option for some is to pay points to bring the rate down over the life of the loan. You will pay more up front, but you will come out ahead, especially if you keep the loan for a long time.
At American Mortgage Services, Inc., we answer questions about this process every day. Call us at 9013595912.