What is a "rate lock period"?

Locking in your Interest Rate

When you're promised a "rate lock" from the lender, it means that you are guaranteed to keep a specific interest rate for a determined period for your application process. This means your interest rate can't get higher during the application process.

Rate lock periods can be various lengths of time, between fifteen to sixty days, with the longer period typically costing more. The lender will agree to lock in an interest rate and points for a longer period, say sixty days, but in exchange, the rate (and sometimes points) will be more than with a rate lock of fewer days.

Other Interest Saving Strategies

There are other ways to get a good rate, in addition to agreeing to a shorter rate lock period. The bigger down payment you can pay, the smaller the rate will be, since you will have more equity from the beginning. You might opt to pay points to reduce your interest rate for the term of the loan, meaning you pay more up front. One strategy that makes financial sense for many people is to pay points to improve the rate over the life of the loan. You'll pay more initially, but you will come out ahead in the end.

At Alerus Mortgage, we answer questions about this process every day. Give us a call at 952 417 8481.

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