What is a "rate lock period"?

Freezing the Rate

When you're promised a "rate lock" from your lender, it means that you are guaranteed to keep a specific interest rate over a determined period for the application process. This prevents you from going through your entire application process and learning at the end that the interest rate has gone up.

While there might be a choice of rate lock periods (from 15 to 60 days), the longer ones are generally more expensive. The lending institution can agree to hold an interest rate and points for a longer period, such as 60 days, but in exchange, the rate (and sometimes points) will be higher than that of a rate lock of a shorter period.

Other Ways to Save on Interest

In addition to going with a shorter lock period, there are more ways you can get the lowest rate. The bigger down payment you pay, the smaller your rate will be, because you will have more equity from the start. You could opt to pay points to reduce your rate for the life of the loan, meaning you pay more up front. 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 are paying more initially, but you'll come out ahead, especially if you keep the loan for a long time.

Riviera Funding NMLS#861382 CA DRE Broker #01186669 can answer questions about rate lock periods and many others. Give us a call: 3103737406.

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