Financing in 07731>Question Details

Nj Mike, Home Buyer in 07731

My interest rate lock Extension will expire before closing. Can I demand to get the market rate? I originally locked @4.25 and now its as low as 3.75

Asked by Nj Mike, 07731 Sun Sep 25, 2011

FHA mortgage, using a mortgage broker, central NJ

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Kenneth Brittman’s answer
Before making demands to lock the rate, you need to know if your transaction is a short sale, new build or regular sale. There is a cost when a lender has to lock a rate for 30,60 days or more, so have a true assessment of the time to close the home at loan application. As a Buyer you should know from your Realtor, that all parties to the transaction have the same information at all times! A new build or short sale will take more time than 60 days to close, so you will want to FLOAT your interest, negotiate the high cost lock or lock the rate when you approach 60 days before closing. Depending on the type of transaction, you may not have time to find a new lender and a new lender may not approve your loan. All professionals to the transaction, should bear the cost of the new rate lock and close the deal before you have a new issue, like credit score or credit report error! Don't hesitate another day without being protected and being unfamiliar with the Fair Credit Reporting Act of 1971. Check my web reference for video's and information to inform you of these precious and valuable credit saving programs. There are also affordable legal plans to advise you of documents before you sign them, so the fine print doesn't take away your good credit !!
0 votes Thank Flag Link Sat Oct 1, 2011
I think John is right - talk to your lender.

Good luck to you,
Jeanne Feenick
Unwavering Commitment to Service, Unsurpassed Results
Web Reference: http://www.feenick.com
3 votes Thank Flag Link Mon Sep 26, 2011
As I know it.. If the market drops below the lock rate you get the market rate. If it goes above the locked in rate.. you are locked in at the lock rate.
2 votes Thank Flag Link Sun Sep 25, 2011
NJ MIke,

Unfortuantely, unless u have locked in the last two days, rates have gone up a bit. But that's all a part of the process.

Francesca Patrizio, Broker Sales Associate, ePro, SRES
Francesca@PatrizioRE.com
732.606.2931
Web Reference: http://www.PatrizioRE.com
1 vote Thank Flag Link Wed Sep 28, 2011
Shane, you are correct. In my haste to answer Mike, I never included the 3.935 APR
1 vote Thank Flag Link Tue Sep 27, 2011
Hi Mike,

I don't know what all the hubbub is about. You would get the lower rate either way since your lock expires, the mortgage company will not want to lose your business and will give you the rate.

I would not advise that you start the process with another lender as you will have to jump through too many hoops to make this work.. Appraisal, paperwork, I can’t imagine going through all of this again especially in todays market.

Speak with your lender, there should be no reason that they will not give you the lower rate since they will not want to lose your business, remember you are in the drivers seat here. If you are uncomfortable.. Lock in at the lower rates that are currently available to you. If your lender looks to charge you for locking at the new rate (which they should not) Then send the bill to the seller of the house. Let the seller pay for it.
1 vote Thank Flag Link Tue Sep 27, 2011
Mike,
I can help you with this. The rates today are at 3.75% on a 30 year fixed FHA loan. Please understand that rates move up and down just like a stock moves up and down. The rates quoted,if not locked can change daily. If your Lender won't "float down"the rate, it might be benificial to move the loan elsewhere.

A monthly payment on $400,000 is $1967.76 at 4.25%.
At 3.75% it's $1852.46 a month. This savings equates to $115.30 a month. Over the life of the loan it's a $41,508 savings. 360(30 years) X 115.30= $41508.00

If your loan is much higher than $400,000 these amounts would be more of a savings.
Please feel free to call me at 201.638.5498 to ask me any questions.
kind regards,
Angelo
1 vote Thank Flag Link Mon Sep 26, 2011
Mike,
Since it costs nothing to apply to more than one mortgage company, it might be smart to have a plan B in place, because even if the lender does agree to float the rate, it is usually done at a cost..... 1/8 to 1/4 % per week extended is not uncommon, and you don't know exactly how many weeks until closing.
Be smart and lock in a plan "B" so these delays will not cost you over the next 30 years. If you want to call the mortgage rep I usually recommend, his name is Angelo and he is very honest and pleasant to work with...his number is 201-638-5498.

Best of Luck!
Jane
http://www.RealTerrific.com
1 vote Thank Flag Link Mon Sep 26, 2011
NJ MIke,

Just had the same situation wherein the rate lock expired before closing and the finance gal gave my client the new lower rate. Hey, if you can't close, you can't close. I think it's a bit more paperwork for them, but it's better than lthem osing the deal.

Francesca Patrizio, Broker Sales Assoicate, ePro, SRES
Gloria Nilson REALTORS, Real Living
732.606.6931
Francesca@PatrizioRE.com
Web Reference: http://www.PatrizioRE.com
1 vote Thank Flag Link Mon Sep 26, 2011
What you are requesting is called "floating the rate" in mortgage terms. Ask your lender to "float" the rate if they do that. Some lenders do, and some do not. The reason they do, is because they know you can go get a mortgage somewhere else if they don't. =)

Jane
http://www.RealTerrific.com
1 vote Thank Flag Link Sun Sep 25, 2011
Demand? No.
NJ Mike I would suggest you chat with your lender or portgate officer (MO) & see what options are available. I'm surprised you don't already have their answer as good MOs are on top of these things.

Good luck!
Bruce
1 vote Thank Flag Link Sun Sep 25, 2011
I would not demand it, but you could and should ask nicely and should be switched to the current rate. good luck with your loan
Web Reference: http://www.ScottSellsNH.com
1 vote Thank Flag Link Sun Sep 25, 2011
Angelo - 3.75% on a 30-year fixed FHA loan with a 3.935% APR?

A 3.75% 30-year fixed interest rate with the only APR affecting fees being the 1% UFMIP + you are starting at 78% LTV so the MI is only paid for 5 years... it still comes out to a 4.289% APR.

Are you absolutely sure the APR is 3.935%?
0 votes Thank Flag Link Tue Sep 27, 2011
I am sure Angelo can provide the APR to satisfy the Reg-Z Shane.... thanks for your attentive and very informative follow up. :)

Jane
0 votes Thank Flag Link Mon Sep 26, 2011
Nj Mike - in contrast to the minority of real estate agents here telling you to move to a new lender shortly before your closing as well as after you chose to lock in your interest rate, you may want to ask your real estate agent to rebate you back some of their commission so you can buy down your interest rate - after all it costs you nothing to get it. I hope you could pick up on my sarcasm.

Jane is correct though that your lender may offer you a "float down" option, where you can lower your interest rate, but it will be somewhere between where you locked in and the current interest rate - you won't automatically get the current prevailing interest rates. When you lock in your loan you protect yourself from interest rates increasing, but do not automatically get a lower rates if rates get lower - otherwise everyone would be dumb not to lock in their interest rate at application.

With nearly all lenders, after your rate has expired for 30 days (so it expires, and an entire 30 day elapses) then you would be able to get the current prevailing interest rates without having to meet "half way", etc... but you also run the risk the entire time of interest rates moving up higher, perhaps even to the point above where you initially locked in your interest rate, and locking in any time prior to the full 30 days past your expiration date would result in the worst case situation between when you originally locked and the current prevailing rates.

Who is not to say you make a switch to a new lender, everything is finally transferred over and in the short period of time that takes, but interest rates have moved up to near where you currently are at? I hope you realize they fell nearly .375% within a matter of 2 days. Or for one reason or another the new underwriter has an issue with your file and now you are holding up the closing because you may have to jump through some additional hoops with the new lender and/or have to find yet another new lender (or go back to your original lender with hat in hand)?

Also, Angelo Lefer @ 201-638-5498, please read http://www.bankersonline.com/marketing/gc_loanadvertising.pdf http://www.bankersonline.com/regs/226/226-24.html & http://www.fdic.gov/regulations/laws/rules/6500-1600.html#fd… - promoting an interest rate to consumers without disclosing it as an APR is a violation of Regulation Z. I would have contacted you privately about this, but you listed no contact information.
0 votes Thank Flag Link Mon Sep 26, 2011
More info: FHA 30 yr, 3.5% down, 400k+ loan. Approx 740-750 credit scores.

Closing has been held up due to sellers issues - they needed to get permits for previous work done to the house. Everything on our side/loan process/approval has been timely, so there hasn't been any hold up there. The sellers finally obtained town approvals as of this past Friday, but we're not going to close for another week or two due to logistics (getting around our work schedules) and we're also in the middle of asking the sellers for repairs we found necessary on a recent walk through, so that looks like it may cause a delay as well.
0 votes Thank Flag Link Mon Sep 26, 2011
I would be more concerned about why your rate locks have expired. The question indicates the rate lock extension is about to expire, that insinuates the initial rate lock also expired. I am submitting a loan to underwriting this morning that was started last week and it will be ready to close later this week. Often home buyers swat at flies and ignore the elephant, why haven’t you already closed?

Just a couple of missing tidbits in your question, the type of loan, loan amount, credit scores, LTV all of which can impact the interest rate. It doesn’t matter if the interest rate is zero percent if the loan doesn’t close!!! Hope this is helpful,
0 votes Thank Flag Link Mon Sep 26, 2011
Hi Mike,
If you opted to lock in a rate and you already have a loan commitment you are probably going to be staying at 4.25% which is still a very good rate. You can ask your loan officer if he can do anything to lower the rate to the prevailing rate but they are not obligated to do so.
0 votes Thank Flag Link Sun Sep 25, 2011
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