Rate Lock Periods
What is a “Rate Lock period”? How can you make sure your Rate is Locked?
A rate lock is a lender’s commitment to close your loan at certain interest rate for a specified period of time while your application is processed. This prevents you from going through your whole application process and at the end of it finding out the interest rate has gone up.
A rate lock period can vary in length, and longer ones usually cost more. A lender will agree to “hold” your interest rate and points for longer periods but in exchange the rate and maybe points are higher than with a shorter rate lock period.
There are many ways besides opting for a shorter rate lock period to get a lower rate, though. A larger down payment will result in a lower interest rate than a smaller one, because you’re starting out with more equity. You can pay points to lower your rate over the life of the loan, but that means you pay more up front. For many people, this makes sense and is a good deal however with rates as low as they are today, TCREG struggles to see the sense of it.
The interest rate a lender is willing to offer you depends on your credit score and your debt-to-income ratio. If you have good credit and your income far exceeds your debt obligations, you may qualify for a lower rate.