Getting a Low Interest Rate

Freezing the Rate

A rate "lock" or "commitment" is a promise from the lender to lock in a particular interest rate and a particular number of points for you for a certain period while your application is processed. This ensures that your interest rate cannot go up while you are working through the application process.

Rate lock periods can be various lengths of time, between 15 to 60 days, with the longer ones generally costing more. The lending institution will agree to hold an interest rate and points for a longer period, say sixty days, but in exchange, the rate (and sometimes points) will be higher than that of a rate lock of a shorter period.

Other Interest Saving Strategies

In addition to choosing a shorter rate lock period, there are other ways you may be able to attain the best rate. A bigger down payment will get you a reduced interest rate, since you will have a good deal of equity at the start. You might opt to pay points to improve your interest rate for the life of the loan, meaning you pay more up front. One strategy that makes financial sense for some is to pay points to improve the interest rate over the term of the loan. You'll pay more initially, but you'll save money in the long run.

Alerus Mortgage can walk you through the pitfalls of getting a mortgage. Give us a call: 952 417 8481.

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