Getting a Low Interest Rate
What is a Rate Lock?
When you are offered a "rate lock" from the lender, it means that you are guaranteed to keep a specific interest rate for a certain number of days while you work on your application process. This ensures that your interest rate won't grow as you are working through the application process.
Although there are several lengths of rate lock periods (from 15 to 60 days), the extended spans are typically more expensive. The lending institution may agree to freeze 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 more than with a rate lock of a shorter period.
Other Ways to Save on Interest
In addition to choosing a shorter lock period, there are more ways you may be able to score the lowest rate. The larger down payment you make, the smaller your interest rate will be, since you will be entering the loan with more equity. You can pay points to lower your interest rate for the loan term, 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 initially, but you will come out ahead in the long run.