@Anonymous wrote:
Hello! So about a month ago we started building a new home, our loan estimate came back at a 3% interest rate. However now that they are going up, we are scared that if they get too high we won't be able to afford the home anymore in which case we would have to pull out and lose our deposit for the new build home. Any advice? Will they keep getting higher? Predictions? We can't lock our rate unfortunately. Any input helps!
How close to the edge of your personal comfort zone is the payment with the current rate? Depending on the loan amount, even a 1% change over 5-6 months could make a substantial difference in your payment amount, or almost no change at all (in context).
In my case, in early November of 2020 when I contracted for my new build I regularly heard things like "rates aren't going up by much if they go up" and "don't worry, rates are at historic lows". Yeah, except reality is that whether rates are at historic lows or not is completely immaterial to the the impact of a rate trending upwards. Every point of increase is higher payment for exactly nothing in return - and it's for the life of the loan! Contrary to all those predictions, rates increased by nearly a full 1% up in that timeframe. I was able to do an extended rate lock (which didn't end up being used, but that's a story for/in another thread). Had I been at market rates after the increase, I'd have been paying an additional $175 a month for exactly the same thing...
You said you couldn't lock yet, I'm assuming that is based on the lender you have chosen (don't feel bashful about shopping around). There is absolutely nothing wrong with proceeding with multiple lenders up to the point where you have to pay for something (appraisal, etc.).
If you're close to your personal payment comfort zone (or a DTI threshold), you're certainly smart to be concerned about it. My best advice is to spend the next XX period of time (between now and when it's time to start processing your loan underwriting) maximizing your scores and be ready to shop around at that stage if things have gone up. Basically, get as close as possible to the position of having lenders compete for your business rather than having to accept what they bestow upon you.
Good luck, I feel ya!
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