Is it too late for us to cancel the mortgage we applied for last month (which happens to be a full point higher then the rate that is available now)?

Asked by John, Livonia, MI Mon Sep 7, 2009

We applied for a mortgage to buy a foreclosed (REO) home in late July. At this point, the sale is still pending. We did pay for the mortgage appraiser who inspected the home last week. The home may or may not be assessed for the purchase price we agreed to (as several repairs are needed). We were locked in at 5.75% on a 30 year fixed loan. Now that I see competitive rates a full point lower, am I obligated to remain with the same mortgage company (if I'm told that it's too late to get a lower rate?) Thanks for replies....

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Rudy McDowell, Mortgage Broker Or Lender, Bloomfield Hills, MI
Tue Sep 8, 2009

As already stated by Bill and Derek's responses, this is not a simple black and white answer. Without knowing all the essentials to give you a fully informed answer, I still however suggest that you consider or ask your current loan officer the following:
- Is your higher interest rate in conjunction to off setting adjustments for your credit score or loan amount? Typically if your FHA loan amount is below 100K and your credit score is below 620 or 660, you will have adjustments for this.
- Furthermore, depending on the loan amount, (especially if its at or below 100K) there may/will not be a significant difference in your monthly payment even if your rate was lowered to 5%. However, it could have a significant impact on how much cash you need to close. In this reagrds, is your interest rate saving you thousands in closing costs?

Finally, your interest rate should be tailored to your specific credit qualifications and mortgage needs. It also should be structured to accomodate your desire for either the lowest monthly payment or closing cost, or something in between. All of which should have been discussed, disclosed, and agreed upon between you and your loan officer in advance of you getting to this point. If you have not already done so, and if your realtor says you should still have time to make a change if necessary, talk to your present loan officer first and give him/her the opportunity and courtesy to go over all of this with before deciding to go some where else.
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David Brewer…, , Livonia, MI
Tue Sep 8, 2009
Actually, the rates being @ 5% today are the same as they were a month ago. There has not been too much movement in the market over these past few weeks. It seems to me, based on your question, that you are working with a Mortgage Broker and not a Bank. That being said, your rate of 5.75% a month ago was not a par rate. The broker has raised your rate to gain yield spead from the bank for selling you a higher rate than what is out there. If you are with a broker and doing conventional financing you will not get a refund for your appraisal if you switch to a different lender. Ask you loan officer why he/she qualified you at 5.75% in the first place. If you are appling for an FHA mortgage the appraisal is good for 6 months and can be transfered to any lender. You are not obligated on any contract that was not written with full disclosure to you and all parties. Therefore, if you have not had the yield spread disclosed to you by your loan officer I'm sure you can pass this on to the sellers agent and an extension will be given to you on the sales contract to obtain proper financing. Call me if you would like some additional info on how rates work for and against you. Do not go out shopping by giving your social security numbers out to people to see what you actually qualify for, it is not necessary and will damage your credit rating. Give me a call if you would like some additional info. 866-508-5220 ext 224 David Brewer Sr Home Savings of America
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William Pola…, Mortgage Broker Or Lender, Suwanee, GA
Tue Sep 8, 2009
Rates are not a full point lower. They are around 5% which equates to not much difference to have to go thru the hassel of changing lenders. The 5% rate will also be more expensive. You might as well go back to the lender you're with and ask if he/she can switch to a different lender (if it's a broker), to save the deal.
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Derek Bauer, Agent, South Lyon, MI
Mon Sep 7, 2009

You need to speak with your agent (hopefully you have a buyer's agent) and honor what is in the purchase contract. By jumping to another lender, you may incur costs from the one you are leaving. That is a competitive business ... you should also speak with the loan officer and see what they can do to make you happy and keep your business. Keep us posted.

Derek Bauer
Real Estate One
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