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Rate lock question

777 Views | 8 Replies | Last: 22 days ago by SteveBott
NWE
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AG
We are building a home in Prosper and the preferred lender (Supreme) offers a 9 month rate lock.

The way I understand it, we can lock in at any time and at the time of closing, they increase that locked in rate .125%

If the rate drops in that time, we get the benefit of the dropped rate (plus .125%)

1. I'm not planning on using this feature - should I consider it?
2. I know rates change daily. Is the prudent action to email the lender weekly to see where the rate is? Currently we're being offered 3.0% and I might consider locking in at 2.75, for example.

Thanks!
Diggity
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AG
I would hold out for 2%
SteveBott
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AG
Is the builder offering incentives to use their preferred lender? How much?
NWE
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AG
I had my lender from the current house looped in to compare.

The preferred lender is offering 5k toward closing and a 3k Nebraska Furniture Mart gift card. My lender said "Make sure to send me the fees and costs associated with closing because that's where preferred lenders of new builds can get you." Once he received them, he said they were very comparable to his team's fees and costs and he couldn't get close to the 8k in incentives so he suggested I go with the preferred lender.

One of the benefits the preferred lender offers is this 9 month rate lock. I don't see rates getting much higher between now and Dec / January so I'm expecting us to hold off on locking anything in. (Unless I'm missing a key benefit of locking in I should be considering). If the rate goes lower, we get the lower rate, but it sounds like we add .125% regardless of where the rate ends up at time of closing.
SteveBott
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AG
Your lender is spot on. And I agree nothing around the corner to drive rates up. It is a gamble either way. But I like a cap at 3.125 and the option to go down. Controls your risk at a slight cost. I am selling purchases at 2.75 and refis at 2.875. It is really about your risk tolerance.
NWE
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AG
Thanks for the insight. Should I be checking somewhere for rates? Should I be emailing the lender weekly?

I ask Alexa, for example and she says 2.98%. That's just the national average for last week. Can I use this as a barometer?
SteveBott
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AG
Normally I'd say watch CNN market watch for 10 year bonds but they are not tracking the market as well as they normally do.

For weekly moves you can track Chase mortgage online

https://www.chase.com/personal/mortgage/mortgage-rates
CS78
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Hows refi demand been with this last dip compared to a few months back?

For a while, rates weren't falling due to a surplus of customers. Has that dried up some?
SteveBott
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AG
That not really how the market works. The market moves on two factors. Economy. Inflation. The end. The Virus affected both by can be absorbed into those factors.

So the markets reflect the economy which is in disaster mode. Bonds and mortgage look much more safe right now.

Inflation is a derivative of the economy. Too much growth the threat of inflation pops its dreaded head into the market.

Not happening due to....wait for it...the economic performance.

Refinance is a by product of that. Bonds do not need to be high to compete with stocks due to the virus. So they pay less and my rates are reflecting that demand and pricing. A client makes a personal decision on whether the market is rewarding them in a refinance.

I have more business since 2012. The run is not over until rates for up.
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