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Old 03-25-2015, 09:45 PM
 
5 posts, read 4,864 times
Reputation: 14

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My wife and I started building a home in the later part of last year. During that time we were pre-approved and signed on with a lender. We paid just under $3K (fully refunded at closing) to do an extended lock with float down that would prevent rates from going above 5% but also provided us the ability to float down should rates decrease.

We are set to close in just under a month and I've been watching rates close because I was told we'd be able to lock in our final rate within 30 days. I've been in contact over the past 2 days and finally got the paperwork today but the rates shocked me. They have the 30 year option at 4.25% and the 15 year at 3.75% (APR slightly higher). My wife and I are debt free, flawless credit, steady income and jobs, providing a very sizable down payment and as far as I can tell about as close to a best available rate as a couple could get. These rates are way above what the market is indicating.

I called to voice my concerns and am waiting to hear back, but I'm trying to be proactive and see what my options are if they tell me those are the rates tough luck because I feel like they aren't honoring the float down. The problem is we've already done all the paperwork with the builder, have a closing date set and I'm pretty sure at this point we're stuck.

Looking for advice and options! Am I off base in my expectations or are they trying to take us for a ride?
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Old 03-25-2015, 09:53 PM
 
Location: San Jose
57 posts, read 59,878 times
Reputation: 34
Is this a construction loan or regular conventional loan?
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Old 03-25-2015, 09:53 PM
 
Location: Denver CO
19,036 posts, read 10,056,661 times
Reputation: 27787
get a quote from someone else and see what they come in at, and then get your current lender to match it or you'll walk away. but also look at your paperwork and make sure that it doesn't specify some arbitrary floor or something that makes their current rate legit under that agreement.
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Old 03-25-2015, 09:54 PM
 
5 posts, read 4,864 times
Reputation: 14
Regular conventional.
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Old 03-27-2015, 06:53 AM
 
Location: Port Charlotte
3,926 posts, read 4,398,723 times
Reputation: 3395
Advertised rates and what you actually get are often two different things. Go shop, but doubt things will vary more than 0.5%.
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Old 03-27-2015, 08:22 AM
 
5 posts, read 4,864 times
Reputation: 14
Quote:
Originally Posted by Restrain View Post
Advertised rates and what you actually get are often two different things. Go shop, but doubt things will vary more than 0.5%.
I can absolutely agree on the first part. I don't expect them to be giving me a rate that's below what everyone else is giving, but these days it's pretty easy to search the web and find out what the prevailing rates are. When we first sat down last year they showed us at 3.5% for a 15 year (which was our original plan). That rate was exactly where the market was for top tier scenarios that day as I checked before our appointment. Now, their rate is showing a "float down" of 3.75% on the 15 year. If you look at the rate trend between August last year when we first sat down to do paperwork and today, rates are down a not insignificant amount. They are giving us a rate increase.

I'm waiting back this morning for a call and information.
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Old 03-27-2015, 09:59 AM
 
7,672 posts, read 9,334,010 times
Reputation: 7902
Quote:
Originally Posted by HGFireHazard View Post
My wife and I started building a home in the later part of last year. During that time we were pre-approved and signed on with a lender. We paid just under $3K (fully refunded at closing) to do an extended lock with float down that would prevent rates from going above 5% but also provided us the ability to float down should rates decrease.

We are set to close in just under a month and I've been watching rates close because I was told we'd be able to lock in our final rate within 30 days. I've been in contact over the past 2 days and finally got the paperwork today but the rates shocked me. They have the 30 year option at 4.25% and the 15 year at 3.75% (APR slightly higher). My wife and I are debt free, flawless credit, steady income and jobs, providing a very sizable down payment and as far as I can tell about as close to a best available rate as a couple could get. These rates are way above what the market is indicating.

I called to voice my concerns and am waiting to hear back, but I'm trying to be proactive and see what my options are if they tell me those are the rates tough luck because I feel like they aren't honoring the float down. The problem is we've already done all the paperwork with the builder, have a closing date set and I'm pretty sure at this point we're stuck.

Looking for advice and options! Am I off base in my expectations or are they trying to take us for a ride?
Where did they tell you to watch the rates? Or is it the prime rate plus whatever percentage? In other words, what did they tell you exactly?

Here is one site that shows the leading rates. I too would call around and see if you can get a better rate with another lender.

Prime Rate | Federal Funds Rates Discount Rate Fed Fund Reserve Lending COFI
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Old 03-27-2015, 12:34 PM
 
5 posts, read 4,864 times
Reputation: 14
We were able to work out an amicable solution. The issue was with the extended lock. The numbers still didn't quite add up on that front as I was told that the float down would be 1/8 to 1/4% above prime rate. Rates are still right around 3.75% for 30 years as of today so 1/4% above that would be 4% not 4.25%.

Anyway, we gave up what we paid to do the extended lock and paid a quite small sum in points to get the 3.75 rate and switching to a conventional lock. The math works out that we'll earn back the money we lost between 6-7 years in the decreased monthly payment.

Let this be a warning to anyone exploring long term locks if you're building a home. Make sure you see the print about the float down.
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Old 03-27-2015, 01:01 PM
 
Location: Denver CO
19,036 posts, read 10,056,661 times
Reputation: 27787
Quote:
Originally Posted by HGFireHazard View Post
We were able to work out an amicable solution. The issue was with the extended lock. The numbers still didn't quite add up on that front as I was told that the float down would be 1/8 to 1/4% above prime rate. Rates are still right around 3.75% for 30 years as of today so 1/4% above that would be 4% not 4.25%.

Anyway, we gave up what we paid to do the extended lock and paid a quite small sum in points to get the 3.75 rate and switching to a conventional lock. The math works out that we'll earn back the money we lost between 6-7 years in the decreased monthly payment.

Let this be a warning to anyone exploring long term locks if you're building a home. Make sure you see the print about the float down.
Glad it worked out.

And I didn't even know there was such a thing as a long term lock! I built new last year, and just waited to lock until we were 30 days out from the estimated close. Timing worked out ok and I am at 4%, no points. My builder ended up having to pay for a lock extension because they missed the closing date, although I don't know if rates were even any different. But I guess it was worth it to them because it would have required too much paperwork otherwise.
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Old 03-27-2015, 08:10 PM
 
Location: MID ATLANTIC
7,601 posts, read 17,629,190 times
Reputation: 8084
The standard for extended lock goes something like this, for a 120 capped rate add 1/2 to today's rate, for 180 days capped rate, add 3/4 to today's rate and for 9 month lock, add 1% to today's rate. But when you go to float down, the take today's 60 day locked rate at 0 points and add .125 to the rate, but for only 30 days. So they are hitting you in 2 places - not only on the .125 add-on, but forcing you to use the higher 60 day quote.

It's pretty standard and it did what you needed, it afforded you a good night's sleep. But, when the market went the other direction, what rate would you have walked away from the 3K lock fee? Or, is that what you are saying you had to do? Were you required to use this lender you locked with? If that is the case, you were a captured buyer, unable to go anywhere else, or so they thought. But anyone unhappy enough would surely pack up their toys and head to a new sandbox.

What you found out by fire is not all quotes are created equal. Most have adjustments for loan-to-value, score, number of days, loan amount, property type, state and secondary financing. Try to get something outside the box, it (extended locks or lock extensions) and the cost goes up.

The lesson isn't about extended locks, the lesson is peace of mind is rarely cheap.
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