Interest rate seems to be going up. If you're having a house built in like 3-4 months, is it a good idea to lock in your interest rate with a mortgage lender. The catch is you lock in at .125 percent higher than the current rate. But you get one "float down" option within 30 days of closing. Also have to pay .5% of the house worth, but you get that back. I don't see interests rates getting lower and with the float down option, it almost seems like a no brainier. Any thoughts from you mortgage experts.
I agree with fadeaway (he shoots, he scores!!). Go ahead. Rates will be going up, so why take the chance?
I just did this last Saturday for the same reason. I won't be ready to move till Nov-Dec. but at least this way the price of the house and the interest is already locked.
I work in Secondary Marketing for a mortgage company, and I'd generally agree with the sentiments of the OP. In fact, I'm currently working on a Lock Desk. Rates have been steadily getting worse for about the last month. If you're in the market for a mortage, it would be a good time to lock in your rate. I'd opt for a long enough lock period to cover your closing and some. There really isn't much of a downside, as most companies offer renegotiation (A.K.A. float down) options. If rates improve such that it makes sense for you, as a borrower, to walk, your lender will check to see if its feasible to reduce your interest rate to current market rates. What most people don't understand about rate-locking is that it costs the company to lock-in your rate. On our end, we lock in your individual rate at whatever the prevailing market rate is on that day. If your loan closes and funds (many don't) we then set up a mandatory trade (or mandatory lock) in a process known as assignment of trade. By this process, we sell many loans to a larger investment bank who then services your loan. However, it typically takes from 10 to 60 days to close a loan, so the mortgage company exposes themselves to interest rate movement when they setup the trade with an investment bank (or other entity) that will purchase loans based on the prevailing market rate in the secondary market. Hence, most lenders will work with you on the rate in order to keep you from going elsewhere because they've already paid for a hedge on your loan. There are other methods of doing this, but this is the most common. Another thing to mention would be that, as a borrower, you shouldn't be totally hung up on getting your rate 1/8th of a percentage point better. The difference in your monthly payment is negligible. The amount that you pay the lender in fees and for other necessary items is more important. If you have any further questions, let me know!
Thanks for the info. As far as worse case scenario I'd be paying .125 more than current rate. Is it common for mortgage companies to get you a good faith estimate on interest and then suddenly increase it when you apply for a loan???. We are looking at mortgage companies as opposed to banks. During our inquiries banks have been less responsive.
I believe the prime rates earlier this year was 3.4% while now is around 3.98%. Doesn't sound like that big till you realize that on a 30 year $200K loan, we're talking about $70 a month difference or almost $800 a year. Lock it in now if you can.
There are lock periods as long as 180 days with certain investors. However, they'll typically require an upfront fee paid by check. The most common lock-in period is 45 days, but they can range from 7 days out to 180 days.
A bank will typically be less responsive to those requesting a mortgage loan. They are typically better suited to servicing loans than they are issuing mortgage loans. Mortgage banks specialize in this, so it makes sense to use a mortgage bank, as they'll have better systems in place to ensure that the mortgage is a quick process and that you're kept in the loop. If you have concerns about who will be servicing your loan, most mortgage banks can work with borrowers to ensure that their loan is serviced by whomever they'd like to be serviced by. The only impediments to this are the overlays to Fannie/Freddie (A.K.A Conforming) guidelines that many investors implement. For example, some investors will not allow the use of tax transcripts instead of full tax returns in verifying income. As for your question on the Good Faith Estimate, lenders cannot increase many of the fees they list on a Good Faith Estimate. That document is a legal document and mortgage banks are bound by disclosure laws and rules regarding the fees on the estimate. You're likely referring to a Cost Analysis Worksheet, which is a quick estimate a lender will provide. They'll typically give a low estimate (because that document is not legally binding), and vice versa for the Good Faith Estimate, as they'll want to give conservative estimates as they cannot increase many of the fees on the Good Faith. For example, if a lender estimates that an appraisal will cost $300.00, and it comes back at $550.00, the lender cannot increase the Appraisal Fee. They have to take the difference as a loss. On the other hand, if they estimate high at $550.00 for the property appraisal and it comes in at $300.00, they're required to refund you the difference. With any lender, I'd keep this in mind in the initial stages of the process. The primary fees you'll want to look out for are Origination fees (which are charged to reflect the cost of issuing the mortgage note -- we typically do not charge origination in today's lending environment), and Discount fees (which are charged reflective of the cost of buying an interest rate below the market par rate). Other fees in escrow are not allowed to be excessive by law, and others are third party fees which will be dependent on the title company or appraiser being used. The best way to ensure minimal fees is to have the seller pay closing costs. Seller contributions can be applied to most every fee on the Good Faith Estimate, so that will minimize what you pay out of pocket. On another note, I'm not a loan officer (I'm not NMLS licensed), but if you're in the market for a lender, I can get you in touch with one of our best loan officers. In working with loan officers I know that many don't seem qualified to do what they do, but I've also found many who are more than qualified and really know what they're doing.
Yes. I had to pay the earnest money up front to be able to do it. But if anything goes sour I get that money back.
Can't thank you enough for the info. We are looking at a preferred lender for the time but if anything comes up, I may be in touch
Not a problem, at all! In fact, we may be the preferred lender! Most of our business comes from builder accounts, so it wouldn't surprise me.
RMC is offering us a 180 day lock for free. They're trying to encourage their customers to lock now so there is no issues with the approved status of our loan with a crazy jump in the rate. Should I lock now? It's at a rate higher than my current home's rate of 5.25%. Today the rate is 5.37%. I hate this. There is a float down program once we get to within 45 days of closing.
This is what makes me upset. My wife is a cosigner and her credit history is limited. She had a 30 day late payment (apparently, but this is a different story) on a $500 limit credit card. I'm the primary applicant, and my credit score is in the lower 800s according to them. My wife's is around 650 because of that late payment and limited history. Yet, it seems we're being charged rates based solely on my wife's credit score. I don't get this. I have another lender providing a quote, but he's way slow. His quotes have been far better though in the earlier part of this process.
