Home Buying in 11216>Question Details

Derit!, Home Buyer in 11216

Once your rate lock expires are you required to extend it?

Asked by Derit!, 11216 Thu Aug 19, 2010

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Dear Derit!.....

If you want to keep the rate, normally you will be required to extend the lock. Usually the bank will want you to pay some kind of fee/penalty to do that. The fact of the matter is that you are not required to do anything if you do not want to and also depending on the status of your deal.

As an example, right now rates are pretty much at an all time low, you may be able to get an even better rate now then when you previously locked in! You should talk to your bank about that. You may even want to shop around rates with other banks to make sure you are getting the best deal possible. Of course all this depends if you have the time in your contract to do so. If your out of time you have less options because if you already received your commitment and do not close on time the seller may have the right to cancel the deal and keep your down payment. Obviously you do not want that to happen!

Remember, a rate lock and a commitment are two different things. Once you get the commitment, it can be argued that you satisfied the mortgage contingency and therefor if you do not close you are in jeapardy of losing your down payment. So be careful!

When you lock in the rate you need to make sure that the lock will last long enough to allow you to close. If the rate lock is for only 30 days but the closing date in your contract gives the seller up to sixty days to close (this is the norm here in Brooklyn) you may wind up in a precarious position. Make sure the lock in duration and on or about closing date in the contract are the same!

I also want to point out that if you paid a fee in advance to lock in your rate and then get your commitment... If you do not close on the loan you will most likely lose that lock in fee. I hope this information helps you, if you have further questions or want to talk, please contact me. Good luck!

Sincerely,
Mitchell S. Feldman
Associate Broker/ Director of Sales
Madison Estates & Properties, Inc.
Office: (718) 645-1665
Cellular: (917) 805-0783
Email: MitchellSFeldman@aol.com
1 vote Thank Flag Link Thu Aug 19, 2010
Derit!

A couple of things to keep in mind when you view this through the lender's eyes:

1) Discuss the costs for extending the rate lock with your loan agent before the lock expires. Even better, discuss this at the time of locking.
2) Typically you cannot expire and re-lock with the same lender and capture a better rate. Lenders will almost always revert to "worst case" pricing for 30 or even 60 days after lock expiration so that you get the pricing on the day you locked, or the current day, whichever is worse. If they didn't have this policy, when market conditions for the consumer permitted, every lock would expire and they'd be in a position of re-locking everything at their loss.
3) If you move your loan to another bank or broker, you may end up starting the whole loan approval process over again, something that your purchase timeline may not permit.

Any questions, just let me know.

Rob Spinosa
rspinosa@rpm-mtg.com
0 votes Thank Flag Link Thu Aug 19, 2010
If you are asking if the rate expiration nulls the contract, no it does not. If you are in contract to purchase a home and the time for the rate come due, it is up to the buyer to keep it current. I you are asking because you are thinking of floating the rate until closing, that's a crap shoot.The rate could go up and could go down. Rates today are low, if you are happy with the rate you have, extend it.
0 votes Thank Flag Link Thu Aug 19, 2010
Depends--are you happy with the rate, otherwise no, unless required by your agreement --what is your loan officer suggesting...
0 votes Thank Flag Link Thu Aug 19, 2010
If you want to keep the rate then yes, otherwise the answer is 'no'... of course unless you signed something that said otherwise.
0 votes Thank Flag Link Thu Aug 19, 2010
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