MortgagesUndressed

Today the rates went up a bit. If you were following the down down up lock game, and following my counsel, you would lock today. Yesterday saw a sizable improvement, today we lost some of it. If you lock today under my $300,000 loan example you would have saved 1068.00. Of course yesterday it was $800.00 more. Tomorrow who knows?

Lock. Game over. On to real life. Lar

Sorry I am late today, we got lucky on rates. This is reality in action. About 10AM most banks have posted their rates. Not always, if the market is volatile there may be a delay.

In this scenario the borrower didn’t want to lock, hoping to save money. So the down, down, up lock game is my opinion on how people should lock. Mind you, last week I felt rates would go down as December is typically an up month. It was last month as rates grew by about 1/4 per cent.

The rules of the game is that the borrower contact me each day - if rates go down - good. If not I suggest they lock. Each day rates go down, ride another day. They day they go up - LOCK. Here again, it is the borrowers responsibility, it is always a gamble. It is a gamble no matter when you lock. Also note, if you are on the borderline for qualifying or if I sense a higher rate makes you or your spouse upset I will push you to consider locking.

What happens if you cannot get ahold of me? Well that is a problem isn’t it? I must do the lock and I must provide you a confirmation sheet verifying rate and terms. Where was I today? What if rates went up? You would be super angry as I was plainly just not available.

We got lucky. Rates don’t really move in 1/4’s or 1/8’s. They move in decimals in fee amounts. You pay a fee one way or another. I will explain that on anothe post. We got lucky as the rate I am using is 5.75%. The fees for that rate improved by .614 points. So if you were borrowing $300,000 you just saved $1842.00. Dang you are a lucky duck. So am I in reality, as I was not available.

What if you didn’t call me? That means you aren’t playing the game right. If you don’t call what do I do? Today was great. You may have been better off locking. The improvement was so good, you may have said lets take it. If you don’t call, how will I know what to do?

Anyway, what will tomorrow bring, as you aren’t locked yet. Larry Cragun

It is a new year with new goals and resolutions for us all. Did you buy a house for new years? If so don’t lock today. Get a feel for what is going on. Let’s play the down down lock game. It is a serious endeavor, picking when to lock. Almost always I suggest you lock when you start your loan application. The difference today is that we went through the typical sluggish December. Rates went up about 1/4 per cent and without any real economic reason. So if you bought over the weekend I would propose you see if they settle back down.

This is your responsibility to decide; not mine. It is also not your loan officers. I voice my opinion only for teaching purposes. In my mortgage career it has been common for people to desire to float for a better rate. Again it makes me nervous in those conditions, so I found it a valuable service to offer a daily call around 10AM when rates are usually posted.

The purpose of the call: to determine what rates are for the day. I suggested that if rates went down they consider locking, but if they chose to float another day, to call tomorrow and go through the same process. Then, the day rates go up, lock. It isn’t a foolproof concept but has seemed to satisfy the urge to float.

So lets play that today. Today we float, tomorrow an update. Larry Cragun

FLOAT:
I really doubt if you have that decision today, the last business day of the year. But my advice stands until Janary 3rd when we really get back to work in our industry. I will probably play the down down up lock game. The reason, we might see a slow drop, a day at a time. We shall see and I will explain it then. Larry Cragun

Check out this article by the Associated Press: Click here

So what really happens if you are close to the lock expiration date and need another day or two? Answer: You are at the mercy of the lender. Most often they have built in a few days cushion. Almost always if you get them to extend the lock you pay a fee for the extension. I don’t like it, it is a revenue stream I resent. Expect it however.

we locked our loan yesterday. Today, rates went up another 1/8%.

Watching And Floating - Interest Rates

The storms that took the power out of the homes and businesses of 1.5 million people in the Pacific Northwest teaches another lesson in our John Daley story. We have to lock today. The story we take you through has John still floating.

What if John wanted to lock Friday? It could not have happened. I was stranded. Most businesses were closed. Even worse, what if we woke up this morning to a crises that set the financial market on it’s heels?

The answer is so sorry, bad luck, nothing can be done. When you float you play the game against mother nature as well as the economics.

Perhaps you can conclude, floating is a gamble I don’t recommend. In our story the rate will be locked today at 1/8% higher than it would have been on November 22nd. There were 2 business days it would have been better for John, but by 1/8%. Not worth it.

Now we have the additonal issue, of closing Friday. It is Christmas week. Much of the staff is getting days off. But to end the story we can assume I faxed the lock in to the bank a couple of hours ago. I have a great relationship with this lender, and have communicatedo our need to rush. The borrower did all they needed to do to get the loan approved to close, the underwriter signed off on all conditions last week, our file is in line for documents later today or first thing in the morning. There are 3 files in line ahead of it. All will be well with the document department. Escrow won’t make an appointment for signing until they receive the doc’s, but I am a regular customer and they will come through for us.
Normally this is too tight of a schedule to be relaxed, not impossible to accomplish, so I end it happily ever after. And the higher payment coming to John, he is well off, he can afford the additional $23.75 a month.

Tune in regularly, Teresa Boardman and I have a new scenario for you to follow.

Continuing the story of my saying to lock. Today the rate went up another 1/8%. One problem that can arise is if the loan officer and the borrower don’t speak every day the loan officer is helpless. I don’t know what John Daly wants except a better rate. That is gone. Do I wait until Monday, the latest? Do I lock his rate without speaking to him? Do I only follow his instruction? The later of these 3 is the answer. Since this is hypthetical, I will wait until Monday. So far, floating has been a mistake. Larry

What do I mean by the heading up 1/8% and down 1/8%? Today we had a slight upward shift in the rates (1/8%) but our boy John Daly is within 10 days of the closing date. With a 10 day lock he can have that 1/8% back. The shorter the time period of the lock the lower the rate (usually). Now it gets real sweaty for the professional loan officer.

John wanted to float. That is obviously for a better rate. Well he can have an 1/8% better rate if we can close in 10 days. Close means funded. From today to close we must have all conditions signed off by the underwriter. For example: the appraisal should have been reviewed by the underwriter and perhaps there is a problem with it. It isn’t unusual to see the underwriter ask for another comparable to be provided by the appraiser. Maybe the value is in question and finding one more home sold that is similar could help support the value. All conditions like this must be provided and accepted before documents can be drawn.

Once conditions are signed off and the loan is cleared to close, the loan must be locked, the documents created, an appointment for signing at escrow, the signing, the signed documents returned to the bank funding department for review, the money ordered and wired to the escrow company, approval to record and fund, and finally funding.

Are we ready for a 10 day lock? That is the only way John gets a better rate. What happens if all of the above takes 11 days? In this case John could lose his rate. He is at the mercy of the lender. It is not unusual for the lender to extend the lock but raise the rate or the fees a little bit. If that happened it could be worse for John. My advice, lock for longer period than 10 days if you are locking today or continue to float. It is the customers responsibility to make this decision. Not the loan officers.

What would you do? John if you are there, what would you do? Larry

Today’s rates: no change. John Daly Score: The same as when we started on 12/22. Is it worth the gamble? You decide. Instead of having a peaceful two plus weeks, a serious rate player would be spending too much time watching the market that no one can predict with certainty.

So we move forward. Should you lock today? Six days left. My Oh My. We must lock on the 18th at the very latest. That date makes it tight for a 12/22 closing. Larry