Getting a Low Interest Rate

Freezing the Rate

When you are promised a "rate lock" from the lender, it means that you are guaranteed to keep a particular interest rate for a certain number of days while you work on your application process. This prevents you from going through your whole application process and discovering at the end that your interest rate has risen higher.

While there can be a choice of rate lock periods (from 15 to 60 days), the longer ones are usually more expensive. A lending institution will 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 fewer days.

More Ways to Save on Interest

There are other ways to get a low rate, in addition to opting for a shorter rate lock period. The larger the down payment, the smaller the interest rate will be, as you will be starting with more equity. You can pay points to improve your rate over the term of the loan, meaning you pay more initially. One strategy that makes financial sense for many people is to pay points to reduce the interest rate over the life of the loan. You'll pay more up front, but you will come out ahead, especially if you don't refinance early.

At The Mortgage Exchange Service LLC, we answer questions about this process every day. Call us: 703.255-5810.

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