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Our buyers are getting a mortgage from a major bank that advertises a 60-day rate lock, which seems to be pretty standard in our area. However, we are now hearing that their mortgage will contain only a 30-day rate lock, a situation that could put us in a bind in terms of the time we have to vacate our home.
The loan is for just under a million dollars, or 74% of the purchase price. Plus, the buyers have gotten a home equity loan against their current home (which they are apparently not selling; that's another story for another day), the proceeds of which they will contribute to their down payment on our home.
I was wondering who would set the rate lock -- the buyers or the bank -- and why it would be just 30 days. Is it because the buyers may be highly leveraged? Is it because they will own two homes? Is it because they get more favorable terms?
Any advice or thoughts would be welcome. We want an agreeable occupancy, but we're not exactly keen on being hustled out of our home prematurely if the buyers are doing it to save a few bucks on their loan. Thanks!
In my area, 30 day rate lock is the norm. The longer your lock, the higher the rate. Some people ride the risk and watch rates and then do a 14 day lock as they get closer to closing. Why would the buyer want a higher rate if he doesn't need it? You should already have a closing date scheduled prior to a buyer locking in their rate. The closing date is in your contract. You can't lock a rate without a fully executed contract. It's a domino.
In my area, 30 day rate lock is the norm. The longer your lock, the higher the rate. Some people ride the risk and watch rates and then do a 14 day lock as they get closer to closing. Why would the buyer want a higher rate if he doesn't need it? You should already have a closing date scheduled prior to a buyer locking in their rate. The closing date is in your contract. You can't lock a rate without a fully executed contract. It's a domino.
Thanks for the feedback. Our contract currently has an approximate closing date that's "on or about" a specific date and in New York, sellers have a 30-day grace period beyond that to set a definitive closing date. If the buyers get a 30-day rate lock, it reduces this state-guaranteed grace period by about three weeks. Plus, we have not seen the buyers' final mortgage commitment from the bank, even though we are more than two weeks past that deadline in our contract. The buyers are in an apartment and do not need to vacate the premises in a hurry to occupy our home. We did see an earlier draft of the commitment and the buyers' interest rate was the same as the bank advertises on its web site for a 60-day lock. So the buyers and their bank have delayed this process and yet the buyers will expect a quick occupancy when all is said and done.
We are trying to set exact closing dates for our sale and purchase that are as close together as possible -- essentially what is best for us. The 30-day rate lock may interfere with that and cause us to spend unnecessarily for hotel stays and storage charges.
Do borrowers get any sort of notice that their rate has been locked. I've been scouting for property and had a question from my mortgage broker asking whether I wanted to put a limit on the interest rate of the loan. Is that language, barring a receipt to that effect, the same as locking the rate?
I understand the concern over the closing date, that's very expected. But what is unexpected is the seller involved with the buyer's lock. You have a contract, your contract pretty much covers every eventuality. The length of a lock has nothing to do with the buyer's qualifying ratios, whether they are leveraging themselves, or not. If I were the buyers or the buyer's agent, I would politely, but firmly ask that you worry about your end of the transaction. The time to ask questions about the buyers' abilities were before you signed the contract.
(I do know it's hard to let the cards fall where they will, I'm a Type A control freak myself, but you really must let everyone do their jobs.....let your agent be the one to follow up)
Do borrowers get any sort of notice that their rate has been locked. I've been scouting for property and had a question from my mortgage broker asking whether I wanted to put a limit on the interest rate of the loan. Is that language, barring a receipt to that effect, the same as locking the rate?
There use to be a program out there by the big, bad Countrywide called "lock and shop." Many banks used this model to hold a rate until a property was found. Then came the mortgage crisis and away went the program. I have heard discussions of some of the portfolio banks and some of the large big boxes, trying to resurrect a form of this program, but it's the disclosure laws that are holding it back.
I understand the concern over the closing date, that's very expected. But what is unexpected is the seller involved with the buyer's lock. You have a contract, your contract pretty much covers every eventuality. The length of a lock has nothing to do with the buyer's qualifying ratios, whether they are leveraging themselves, or not. If I were the buyers or the buyer's agent, I would politely, but firmly ask that you worry about your end of the transaction. The time to ask questions about the buyers' abilities were before you signed the contract.
(I do know it's hard to let the cards fall where they will, I'm a Type A control freak myself, but you really must let everyone do their jobs.....let your agent be the one to follow up)
Sorry, but it is my business if the buyers take a shorter rate lock so they can get a bigger discount on the interest rate and then want to force me out of my home sooner than expected. Complying with the rate lock could force me to rent at an annual cost of tens of thousands of dollars more than a purchase, since my next transaction will be all cash. Yes, I do have contractual rights to extend the occupancy date past their rate lock. If they agree, they would have to pay a fee to extend the lock. If they refuse, well, it remains to be seen if we could then keep their earnest money. Of course, none of this is a problem at the moment because we still don't know if they can even get their mortgage.
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Rate locking
