topic Re: Too early to lock? in Mortgage Loans

Too early to lock?

nate79416 — Mon, 17 Aug 2015 23:08:37 GMT

It will take about 6 months to build our home, I see on the pre approval it says too early to lock, but I thought you could?

Thanks(I feel like a dummy)

Re: Too early to lock?

ezdriver — Mon, 17 Aug 2015 23:33:17 GMT

60-90 day locks are common. No lender to my knowledge will offer a 6 month lock.

Re: Too early to lock?

StartingOver10 — Mon, 17 Aug 2015 23:43:19 GMT

nate, don't feel like a dummy. This is not something that you do all the time unless you are in the business. You know that old saying: There are no dumb questions...

Re: Too early to lock?

mynameainttracy — Tue, 18 Aug 2015 08:55:09 GMT

When we started the process we were given a 3.75 rate (VA) and by the time we closed we were at a 3.375. Our LO had our backs and told us when we should lock. We ended up locking at about 60 days out. Anything prior to that required us to pay and the long term savings just didn't support the extra out of pocket we would have had to pay.

Re: Too early to lock?

edcampbell613 — Tue, 18 Aug 2015 10:23:06 GMT

All lenders should have an extended rate lock program but remember the rates are usually higher by .25-.50 (ish) for 180 days / 6 mos

With what professionals have been predicting, rates should go up. But how far? Who knows.

Now you need to find a lender that has a float down option.

example

Say your 30 day rate today is 3.75

extending the lock out for 180 days costs .375

You lock it at 4.125 for 180 days

30 days prior to closing I would keep my eye on the market and see where they are.

If the rates are at 4.00% or higher you made a good gamble.

If the rates are 3.635 or lower you could have waited and got a better deal.

Rate float down options usually cost .125% or higher to exercise that option. so if you lock at 3.75 and rates are 3.625 when the house is done you will have the same rate. if they drop to 3.5%just add .125 to the rate and you now have 3.625%

MAKE SURE TO SHOP AROUND!

If your builder has a list of 3 lenders please shop them all and even look outside of the preferred lender list.

The biggest scam (IMO) is when builders only have 1 lender that is tied to the builder like Ryland homes,

Ryland offers 1500 towards closing costs in my area. They send you to RMC (Ryland Mortgage Corp) They charge you 1% origination (in most cases) so you buy a home and finance 250,000 and charge you 1% so you pay 2500.00 just in the lender fee. My bank we dont charge origination points, I beat Ryland in my are all day long. But you might pay more, you might pay less either way SHOP AROUND! Builders love using smoke and mirrors to make their lender look all so wonderful. I call it lipstick on a pig!

Re: Too early to lock?

StartingOver10 — Tue, 18 Aug 2015 11:12:45 GMT

Agree 100% with edcampbell613 above. ^^^

I see the same thing here, the builders lender is tied in with the builder and either their lender fees are higher or the interest rate is higher or both fees and rate are more.

This is especially true when the builder says they will pay $X toward your closing. Almost always the amount of money that the builder contributes is less than the cost that the builder pushes over to the buyer side of the HUD.

For example, the contract states the builder will contribute $7500 and when you get your loan disclosure you see that the figures that are normally paid by the seller are to be paid by the buyer add up to $10k plus. Shop around like edcampbell suggests - it is worth your while. In fact, shop before you contract so you can negotiate in either a better seller contribution or know up front you aren't using the builders lender.

I am not saying to never use the builders lender. All I am saying is know what it is going to cost you on the front end rather than finding out when you are well into the purchase.

Re: Too early to lock?

ezdriver — Tue, 18 Aug 2015 14:59:40 GMT

@edcampbell613 wrote:
All lenders should have an extended rate lock program but remember the rates are usually higher by .25-.50 (ish) for 180 days / 6 mos

With what professionals have been predicting, rates should go up. But how far? Who knows.

Now you need to find a lender that has a float down option.

example

Say your 30 day rate today is 3.75
extending the lock out for 180 days costs .375
You lock it at 4.125 for 180 days

30 days prior to closing I would keep my eye on the market and see where they are.

If the rates are at 4.00% or higher you made a good gamble.

If the rates are 3.635 or lower you could have waited and got a better deal.

Rate float down options usually cost .125% or higher to exercise that option. so if you lock at 3.75 and rates are 3.625 when the house is done you will have the same rate. if they drop to 3.5%just add .125 to the rate and you now have 3.625%

MAKE SURE TO SHOP AROUND!

If your builder has a list of 3 lenders please shop them all and even look outside of the preferred lender list.

The biggest scam (IMO) is when builders only have 1 lender that is tied to the builder like Ryland homes,

Ryland offers 1500 towards closing costs in my area. They send you to RMC (Ryland Mortgage Corp) They charge you 1% origination (in most cases) so you buy a home and finance 250,000 and charge you 1% so you pay 2500.00 just in the lender fee. My bank we dont charge origination points, I beat Ryland in my are all day long. But you might pay more, you might pay less either way SHOP AROUND! Builders love using smoke and mirrors to make their lender look all so wonderful. I call it lipstick on a pig!

I disagree with that statement. It is not a scam when a builder is trying to mitigate its risk of building a house based on an outside lender's prequal. Also, I'd like to remind you that no lender can force any buyer to use any particular lender to finance the mortgage. That is Federal law. However, builders typically offer buyer incentives to use its preferred lender. For example, we [I'm a builder's rep] offer a $7,000 contributions towards closing costs if the buyer uses our lender [we own 50% of our lender] and $0 if an outside lender is used. The exception is that we will still give the $7,000 if a buyer finds an outside lender after our lender determines that it could not approve the loan.

For those wanting to know why builders require prequals from their preferred lenders, it is usually for a few reasons; Fore example

1) We are able to keep earnest money deposit requirement low. In my area [Northeast Florida] and neighborhood, It is $3k for a buyer not currently owning a home and $10,000 otherwise.

2) We are able to monitor the financing process accurately and regularly ... again mitigating risks.

3) We are able to make decisions on starting construction of a home even when our lender may be indicating the need to improve the buyers credit/financial profile.

Etc.

Re: Too early to lock?

ezdriver — Tue, 18 Aug 2015 15:10:17 GMT

Closing costs to buyers are usually much less with resale purchases vs new construction. There is no rule that requires it to be that way but common sense tells me that a buyer has much more leverage over a resale home owner than a builder. As a builder, we contribute a flat $7,000 [in Northeast Florida] and the buyer is responsible for anything above that. We encourage our buyers to shop around and choose what they conclude is the best deal for them. Our lender does not charge any origination or application fees. Suffice it to say that I have not seen a single buyer choose an outside lender because of rate and/or fees in the four years that I've been selling new construction in Northeast Florida. I have no doubt that some claims are true for some builders. However, blanket statements about all builders are just silly.

Re: Too early to lock?

edcampbell613 — Tue, 18 Aug 2015 16:06:45 GMT

Like I said, All smoke and mirrors,

In Florida the seller/builder pays a portion of the state tax/stamps.

On a 400,000 home financing 350,000 the seller/builder pays 2,800 of that so now the 7,000 gets kicked down to 4,200

And there is no risk, a builders don’t go off pre-quals, they build off commitment letters. Once the file is underwritten the LO issues the commitment letter to the borrower and asks that they forward it off to the builder. If they don’t do it this way the buyer should find another builder!

"1) We are able to keep earnest money deposit requirement low. In my area [Northeast Florida] and neighborhood, It is $3k for a buyer not currently owning a home and $10,000 otherwise."

This sounds like discrimination

"2) We are able to monitor the financing process accurately and regularly ... again mitigating risks."

Lenders are NOT allowed to share any information with the builders such as credit scores / income / assets act. That is a violation of privacy. weekly updates, status of file is allowed. but to "monitor" with an inside company, sounds fishy to me.

3) We are able to make decisions on starting construction of a home even when our lender may be indicating the need to improve the buyers credit/financial profile.

Any lender can contact the builder and tell them to start pounding nails once the commitment letter has been generated. As for pounding nails for a "get me done" I would not suggest a buyer to do that as it hurts a relationship between builder and outside lender.

The CFB is changing things, if these builder banks are still around in 2 years I will be shocked.

Wells and Prospect both pulled out of MSA's

It will take an audit to catch it but they will.

And I am not dissing your job at all. Like I said earlier, Most in-house lenders are a scam. Movement Mortgage in the Realtors office are the biggest. Rates are about ,25% higher than other lenders but the Realtor steers them to them due to marketing agreements. If I was a customer and I found out that a realtor did this I would never use them again.

Re: Too early to lock?

nate79416 — Tue, 18 Aug 2015 17:10:21 GMT

I will keep all this in mind, I am going through one of the builders lenders, and I did not want to be overcharged at all! I sent my purchase agreement to my LO, is he suppose to send me a estimated cash to close etc, or is it to soon, it will take about 6 months to build our home. One thing I did see that was strange is the builder will not work with realtors/buyer's agents only their own sales specialist

Re: Too early to lock?

mynameainttracy — Tue, 18 Aug 2015 18:05:20 GMT

That isn't the end of the world. It was the case with our builder since we didn't have a realtor with us on our first visit. Throughout our process there wasn't anything a realtor could have done for us that we couldn't do ourselves. BUT...not every build will always be that smooth so be cautious and look out for yourself.

Re: Too early to lock?

ezdriver — Tue, 18 Aug 2015 19:17:56 GMT

There is so much misinformation and inaccuries in the above post by edcampbell613 that I won't bother to address. Readers beware!

Re: Too early to lock?

Anonymous — Tue, 18 Aug 2015 19:22:05 GMT

To your question, I think it's too early to lock. Your lender choices will be limited and/or you will have to pay much more to lock up a rate. You should, though, investigate float down policies w any lender you're considering.

As for all the other stuff in this thread, I'm not sure I agree with a lot of it. From the consumer perspective, I'm on my 2nd new construction purchase. On my first, I used the builder's lender. I only looked at it from a #s perspective. They were giving $20K in total incentives, so it was a no brainer even if it had a higher than market rate.

On my current build, I've decided to pass on the $3K in incentives and use an outside lender. Usually, a builder's lender will try to match your rate, so that's the best of both worlds -- keep the incentives + get a better rate. In my case, my rate was so low, the preferred lender wasn't able to match, so I will just eat another $3K in costs by going w an outside lender.

They're not a scam. You have to look at the #s. I suggest doing a comparison in excel of your total outlay for 5 yrs, 7 yrs, and 10 yrs. Whichever is the lowest is what you should be going for depending on the time horizon that fits your profile.

Re: Too early to lock?

edcampbell613 — Tue, 18 Aug 2015 21:21:55 GMT

Like?????

You are also the person that said you dont know of any lenders that do a 6 month lock, you ust have your head in the sand down in Florida.

Wells Fargo, ever heard of them?

Suntrust?

Bank oif America?

There is so much misinformation and inaccuries in the above post by ezdriver that I won't bother to address. Readers beware! (ohh wait, thats your line)

LOL

Re: Too early to lock?

nate79416 — Wed, 19 Aug 2015 02:35:15 GMT

I sent my LO my purchase agreement shouldn't I have received a gfe?

Re: Too early to lock?

nate79416 — Wed, 19 Aug 2015 02:40:39 GMT

Also if their fees are outrageous, I can change lenders right, during the build process?

Its amazing how we come here to ask the questions verses asking the LO LOL! #trust

Re: Too early to lock?

edcampbell613 — Wed, 19 Aug 2015 03:06:12 GMT

You should get one no later than 3 days after the LO takes the application live. Once it is live they have 3 days to disclose the loan with all the details.The TIL will show you rate to APR, this is always a good way to see what loans have less fees.

Re: Too early to lock?

edcampbell613 — Wed, 19 Aug 2015 03:08:29 GMT

You can take the loan anywhere before the loan closes. All you have to do to get an accurate quote is to give hi your exact FICO scores. Anyone should be able to get you exact closing costs (escrows pending) with an accurate FICO.

Re: Too early to lock?

nate79416 — Wed, 19 Aug 2015 03:18:06 GMT

Also I read by law he was suppose to give me a gfe within 3 days of my app/pre approval, that wasn't done and he still has not given me one, smh

Re: Too early to lock?

edcampbell613 — Wed, 19 Aug 2015 03:41:39 GMT

Only when the loan goes live can we generate a GFE. The exact sales price of the home will calculate the closing costs.

The pre approval has a blank address. (usually)