Step 8: Lock your rate and points

Since weeks, and sometimes months, can go by between having your offer accepted and closing on your new home, it’s a good idea to lock in your interest rate and points.

What is a rate lock?
A lock is a commitment by the lender that guarantees you a certain interest rate for a specific period of time. For example, your lender might offer you a 6 percent interest rate for zero points for thirty days, or 6. 25 percent rate for forty-five days for one point.

Time period
The most common amount of time for a lock is 30 days. However, locks come in fifteen day increments and you can get a lock for 15, 30, 45 or 60 days. Some lenders even let you lock past sixty days. It is good to remember, though, that the shorter the lock period, typically the lower the rate will be. The longer the lock period, the greater the risk to the lender that rates will change, and not necessarily in the lender’s favor. That’s why lenders usually charge more for a longer time period with a lock.

Locking into rates and points means that your lender commits to giving you a specified interest rate for a specified period of time. If you don’t lock into rates and points, you risk your mortgage costing you more than it needs to, so be sure that you are clear about what you lock into and for how long.

Next step: Getting a home inspection and an appraisal.

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