Getting a Low Interest Rate
What is a Rate Lock?
When you're promised a "rate lock" from the lender, it means that you are guaranteed to keep a certain interest rate for a determined period while you work on the application process. This keeps you from going through your whole application process and discovering at the end that your interest rate has gotten higher.
While there may be a choice of rate lock periods (from 15 to 60 days), the extended ones are usually more expensive. The lender may agree to freeze an interest rate and points for a longer span of time, like sixty days, but in exchange, the rate (and sometimes points) will be more than that of a rate lock of a shorter period.
Additional Ways to Save on Interest
There are more ways to get a low rate, in addition to choosing a shorter rate lock period. The more the down payment, the smaller the interest rate will be, as you will be starting with more equity. You may opt to pay points to improve your rate over the loan term, meaning you pay more initially. One strategy that is a good option for many people is to pay points to bring the rate down over the term of the loan. You pay more up front, but you will save money, especially if you don't refinance early.
At Contemporary Mortgage Services, Inc, we answer questions about this process every day. Give us a call at 407-834-3377.
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