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A rate "lock" or "commitment" is a promise from the lender to set a particular interest rate and fees for you for a specified period during your application process. This means your interest rate can not rise during the application process.
While there are various lengths of rate lock periods (from 15 to 60 days), the longer ones are generally more expensive. The lending institution can agree to freeze an interest rate and points for a longer period, like 60 days, but in exchange, the rate (and sometimes points) will be higher than that of a shorter period. In rare cases, lenders will actually price longer locks cheaper than shorter locks if the lender is not able to meet shorter deadlines for closing. This typically happens during refinance booms where the lender is inundated with loan applications all at once.
CHA Mortgage Company will work with you to determine the best lock period for your specific situation.
A larger down payment will get you a lower interest rate, because you will have more equity at the start. The more equity you have, the lower your interest rate. You can pay points to bring down your interest rate for the term of the loan, meaning you pay more up front.
Depending on your goals and how long you plan to stay in the home, it might make more sense to pay a higher interest rate up front and pay no closing costs upfront for the loan. We do this by calculating your break-even point by comparing the savings from taking the lower rate vs. the amount of fees you would save by taking the higher interest rate.
At CHA Mortgage Company, we answer questions about this process every day. Call us at 503-753-7577.
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