Financing in Missoula>Question Details

Astro26, Home Buyer in Missoula, MT

My loan lock expires in a week, and the house is not ready to close. Do I have to pay for a lock extension if I am not interested in extending it?

Asked by Astro26, Missoula, MT Tue Jun 21, 2011

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When your rate is about to expire, and your loan has not funded yet, you have options:

1. Let it expire, and the day afterwards you can lock in "worst case pricing" - meaning the higher rate between the rates when you locked in initially and the current interest rate.
2. Extend it, and:
a) if the rates are better than when you locked in, the extension with most lenders will be free
b) if the rates are worse than when you locked in, the extension usually has a cost (each lenders cost is different, check with yours, but typically it's 15 day extension for .125 in fee, 30 day extension for .25 in fee, but it can certainly vary)
3. Let it expire, and wait a full 30 days, at which point you can then lock in lower interest rates than when you initially locked, but if you re-lock within the first 30 days after your lock expiration it reverts back to the scenario in #1

So if you do not extend it, prepare for options #1 or #3.

Each lender's lock & extension policy is different, so be sure to ask yours so you aren't devastated by making the wrong move.

Now if you don't even want to buy this house anymore, like the real estate agents here have mentioned, consult your own real estate agent and read your contract, you could potentially lose your earnest money deposit and/or be liable for certain damages.
0 votes Thank Flag Link Wed Jun 22, 2011
Careful here, sounds like you would like out of this sale, make sure the seller is at fault if you do, or that you fall into one of the no fault reasons which allows you to walk away. As to the closing what is the cause of the closing not meeting deadline?
0 votes Thank Flag Link Tue Jun 21, 2011
You do not have to extend the rate lock. You should be aware that once the rate lock expires, your rate goes back to a float - but not a true float. And, in order to relock, you usually have to do so within a matter of days of the original rate lock.

If mortgage rates go down, you will not get the lower rate. You will get the rate you originally locked in at. However, if rates go up, you will get a higher rate.

At some point, you will have to relock your rate before you make settlement. If you decide to let your rate lock expire, make sure you keep a good eye on the rates (and in constant communication with your mortgage originator) so that you don't wind up with a much higher rate than you originally hoped for.
0 votes Thank Flag Link Tue Jun 21, 2011
What does your contract state regarding backing away--consult with your agent and loan officer regarding the extension, they will be your best guide....
0 votes Thank Flag Link Tue Jun 21, 2011
It depends on if you want to buy that house. If so, then you will need to allow the loan to float or pay to relock it. You might be able to get the seller to pay some of the lock fee since they missed the deadline, assuming there was one. I have seen buyers lock way too soon, before told to by the builder and if that is the case then you are going to have to work it out or walk away. Walking away might mean loosing any deposits.

Talk to your Realtor, you do have one I hope. I would never deal with a builder by yourself, they don't have to treat you equally or fairly, you know, since they are the seller.
0 votes Thank Flag Link Tue Jun 21, 2011
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