Monday, August 15, 2011

Mortgage Rate Lock

Starting 60-Days from closing, you are able to lock your mortgage rate in.  We got our date about a week after drywall went up and our PM coordinated this for us.  From this point, I started getting daily emails from the loan officer with rates.  The rates provided are based on a 60-Day Lock.  Every day, I got 2-4 rates with a rebate/points associated with each rate.  Below are fake numbers and do not reflect the real market or the numbers we locked in at.  I suspect your rates will vary based on your credit situation as well as the loan type & term you chose.  Ours is based off of a Conventional 30-Year Fixed Rate.  Your rates will be impacted by your credit score.  If your credit score goes up or down, this will affect the rebate / points situation depending on how much of a swing you have.

60-Day Lock - These #'s are fiction and are here for demonstrative purposes
4.25% and -0.50% points
4.35% and 0.50% rebate
4.50% and 0.875% rebate
4.75% and 1.250% rebate
***All with 1.00% loan origination fee (one of the incentives at contract was a point off of closing, so this doesn't apply to us)

30-Day Lock
Same rates as above.
Add 0.375% Rebate

Rebate or Points is a % based on the loan amount.  If it is 'points', you need to pay the mortgage company to get this rate.  If it is a Rebate, the mortgage company will pay you that amount to take the rate.  Your goal should be to take the lowest actual rate you can afford.  If you absolutely need money at closing, you may have to take a higher rate and the higher rebate that goes along with it.  Warning:  Taking the higher rebate at closing may be nice then, but will literally cost you 10's of thousands over the course of the loan and you'll have a higher monthly payment with a higher interest rate.

If you feel rates will trend down, consider waiting until the 30-Day Lock is available as it will mean less money at closing.  If rates are trending up (or you have reason to believe they won't stay down) waiting for the 30-Day Lock could end up hurting you.  I tracked the rates since I started receiving them, it is entirely possible for the rebate/point to swing more .500% in a given day.  Waiting for the 30-Days is nice, but only do it if you believe rates will stay the same or go down.

I took a big gamble with the Debt Ceiling issue going on in the political world.  Several friends recommended I lock in ASAP because the rates would shoot up if the ceiling wasn't raised or if Moody's downgraded the U.S.'s debt rating.  Fortunately, I have a contact with very good insight in the market and all things financial.  His advice was to wait it out and if things start trending up for a few days, jump in and lock.  He told me that the driving forces for mortgage interest rates are the Treasury Note rates,  unemployment figures and the economy in general (GDP).  All of which were not going to change drastically in 30-days.  Job's numbers were the only number to go up and it was not enough to indicate the economy is doing better.

In the time I started tracking, the rates themselves rarely changed, they did decrease 2x.  The rate decreased about 0.25%.  What does fluctuate on a daily basis is the the points rebate situation.  This usually goes up or down or sometimes stays the same.  I highly recommend creating a spreadsheet for tracking these numbers to see if there is a trend and how the points / rebates affect your closing.  We received a GFE (Good faith estimate) which factored in a certain rebate amount, so I've been planning to come up with that certain amount for closing.  Depending on where the rates settle for your lock, will determine if you will need more or less money at closing.  Also note that if your credit score enters another bracket, you could get a nice little bonus there too in the form of rebate.  Vise-versa if your score goes down however.

Last thing.  Monitor your credit score throughout this time.  We had an issue with a bank that we didn't even know about until our credit score went down (drastically).  We contacted the bank, took care of the issue, raised hell for poor communication and had them remove the negative aspects from our credit report.  If we didn't get this resolved, it could have cost us literally thousands at closing.  Be a hawk on your credit report and bills throughout this time.

If anyone wants to know the exact #'s we locked in at, or would like a copy of the tracking spreadsheet I used, feel free to message or email me!

3 comments:

  1. Thank you for the insight! I would love to take a look at your spreadsheet...or better yet have the hubby take a look at it. He's better at numbers than me, but this interest rate stuff is hard for me to wrap my head around. Thanks! my email is noreenerin1977@gmail.com

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  2. And Welcome back from Vacation!!! Hope you had a relaxing time :)

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  3. Welcome back stranger! Hope you enjoyed your vacation!

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