How to monitor lockedin Interest Rate? (loan, fixed rate, 30 year, loan)

[bholeyr]

It may sound like a stupid question but how do you monitor locked in interest rate ? I applied for a year loan and locked in my interest rate at 3.87%. I was told that the locked in rate comes with float down option. If I remember correctly, I was told that if the interest rate goes down by a 1/8th (12.5) percentage, I can call in for a downward re-adjustment. What I don't understand is that how do I monitor this and what rate should I compare this with ? The rates are all over the web with different values. What is an effective way to monitor interest rate ?

[SmartMoney]

Okay, you are missing some facts:

Is this a home being built, or, have you closed on this loan? (Yes, it's possible post-closing).

If you haven't closed, you need to check your lock-in documents. ALL float-down locks vary from company to company. More often than not, the float down is based on taking the lender's 60 day quote for that day and adding .125 to determine the rate you can float down to. Most only allow the float-down when you are within 60 days of closing.

If you have closed, a small number of loans were offered with a lifetime float-down, one time only, for a modest fee. If that is your situation, you need to refer to your loan docs.

[bholeyr]

Thank you for your response. This is preexisting home and I plan to close on 5/30. When you say "and adding .125 to determine the rate you can float down to" what do you exactly mean? So in my case, if my contract rate is 3.87 can ask for a float down if the interest rate goes to 3.38% ? (3.87 - (3.87*.125)) Also, how can I monitor this ? Is there a good web site that I can use ?

[SmartMoney]

Originally Posted by bholeyr

Thank you for your response. This is preexisting home and I plan to close on 5/30. When you say "and adding .125 to determine the rate you can float down to" what do you exactly mean? So in my case, if my contract rate is 3.87 can ask for a float down if the interest rate goes to 3.38% ? (3.87 - (3.87*.125)) Also, how can I monitor this ? Is there a good web site that I can use ?

The float down agreements with companies I have been with worked like this:

Last year when I locked in for 360 days, the rate was 3.875%, with a float down. To exercise the lender's float down, I had to take their 30 year fixed rate quote for 60 days and add .125%, but only when I was well within 60 days.

My home will be ready May 27.

This past Friday I wanted to lock in. My lender was quoting 3.625% with 0 points. To exercise my float down, I could do so at 3.75%.

Your float down is with your lender, it's not tied to any market rate that is readily available on a website or Wall Street Journal. There's no way to track a specific lender's float DOW, they are all individually created, if offered at all. (And if you have a C-perm loan, it's altogether unique).

[bholeyr]

Thank you SmartMoney. Your explanation is very helpful