RCG Reader Asks: Can You Beat this Rate? July 7, 2007
I received this email from an RCG reader last night:
“… My fiancé and I are moving…on the 23rd (our closing date). We still haven’t locked in a lender but we’re lined up to go with Wells Fargo right now. Wondering if you could give us a lead on better rate? We’re going for a 5/1 IO Jumbo. I’ll attach the estimate they gave us. It’s 6.25% with no points, and a couple grand in closing costs. Thanks!”
The closing costs appear to be in line…however, the estimate is dated June 4. This is just about when rates began to trend higher. The rate on the estimate is no longer valid. A lot has happened with interest rates over the past six weeks!
My recommendation to our reader is to:
- Contact their LO today (do they work on a Saturday?) to see if they can still honor that estimate from June 4. They only way they really can is if the LO locked in the rate without telling the home buyer. If the LO cannot provide that rate from June 4, it’s not their fault. It was the home buyer who didn’t “lock in a lender”. If the LO can provide the same rate and fees shown on the estimate from June 4, the home buyer should jump at it!
- If the rate was not locked (which is most likely the case), the home buyer should obtain an updated quote from the Wells Fargo LO and decide at that point if they are going to stick with this LO or shop rates being prepared to lock the rate that day.
I cannot beat rates from June 4, 2007 on July 7, 2007.
If you’re closing on a transaction 60 days or sooner, please consider locking in your interest rate. The difference in cost between 30 and 60 days on a lock is around 0.125% in fee (not rate). On a $500,000 mortgage, that would be $625 more to lock in the rate.
Traveling back in time to June 4th…based on a $500,000 loan amount, if you were to have locked in a rate for 60 days to close by July 23:
6.25% at priced at zero discount for 30 days = $0
6.25% at 60 days = 0.125% = $625 for a 60 day lock
Interest only payment at 6.25% = $2,604.17
Locking the same loan today for closing July 23:
6.25% cost 1 point = $5,000
If you don’t want to pay points, 6.5% is at zero.
Interest only payment at 6.5% = $2,708.33
Waiting to lock has cost either $4,375 in fee ($625 vs. $5000 to have 6.25% for an interest rate) or has cost $104.16 in monthly payment.
When you lock in your interest rate with your Mortgage Professional, be sure to:
- Get a written Lock Confirmation for enough days to accommodate your closing.
- Have your Mortgage Professional provide a Good Faith Estimate to accompany the Lock Confirmation.
- Ask the Mortgage Professional to guarantee their closing costs shown on the good faith estimate (the lines in section 800). This will be subject to loan approval and third party costs, such as title and escrow, should not be included.
I do not advise “floating” your interest rate. Especially in our current rate environment. Consider the worse case scenario…if you’re happy with the rate you’re being offered, lock it! Floating just may get you burned.
Check out these related posts:
- Make Sure Your Loan is Locked
- The Problem with Good Faith Estimates
- Extensions: When Your Time is Up With Your Lock
Article Tags>> Good-Faith-Estimate | guarantee | interest-only | interest-rate | jumbo | lock | Mortgage and Lending | points | purchase | wells-fargo
- Posted in : Buyer Information, General Real Estate, Mortgage and Lending
- Author : Rhonda Porter
Comments»
no comments yet - be the first?