October 9, 2013
If you have been around the real estate industry for any length of time, you have probably heard the phrase “Lock Extension”. Just the thought of it sends shivers up the spine of many borrowers, as it usually involves extra cost to their loan.
In today’s video, Eric shares how you can protect yourself the next time you lock a mortgage rate, and some exciting news from his Lock Desk … such as how to lock up to a year before you close! ******
If you are like me and have been around the housing industry for a length of time – maybe you’re a Realtor, escrow officer, or simply purchased a home or two – you may have heard the phrase “lock extension”.
Those two little words probably scared you down to your toes…since it usually corresponds with extra cost being passed along to the borrower.
Here’s why; when you lock an interest rate, the bank is actually reserving funds. They are promising you will get the rate you locked in, as long as you close by the lock expiration date.
So how long can you lock? Well, it varies. Most banks follow the traditional lock terms: 15-day, 30-day, and sometimes up to 45-day locks. A few banks may go farther than that, but most won’t.
**Watch Out For This** Some banks in our local market will actually go 10, 25, and 40 days…a closer look shows you they are chopping 5 days off the end. This gives them more time to package up your loan before shipping it off to their investor; they are penalizing you for their convenience with a shorter lock term, and in most cases for the exact same pricing.
At Guild Mortgage Company, we follow the traditional time-frame; we even recently added a long-term lock for those who need have a transaction that needs a bit more flexibility.
However, there are things that can hold up a transaction, for instance; repairs taking longer than expected, or a seller who has to delay their move-out date. It’s not the bank or the borrower’s fault, but the transaction still has to be extended.
Here is the important part – if you didn’t lock correctly, and your lock expiration was matched up to the closing date, YOU are the one footing the bill to extend that lock. This is why it’s so important that you lock with the right term in mind, and that you have the right lender taking care of you and making sure you are protected throughout the process.
In addition to the traditional lock terms, Guild Mortgage Company recently added a long-term lock program.
When would this come into play? Let’s say are building a home – either you have construction financing, or the builder is carrying your financing during construction – you won’t be ready to close for another 6 to 9 months.
Maybe you are buying a home that is being remodeled and won’t be ready for full financing until it is complete. Or perhaps you want to purchase a home and already have an offer in place…but have not sold your current house.
Now you have the ability to do a long-term lock, in advance, guaranteeing today’s pricing. This is especially significant now; while everyone is expecting rates to go up in the next calendar year, you can protect and lock in your rate NOW. Call me for details at 503.698.5801. I look forward to helping you lock in your next loan correctly! www.CallNewman.com