Does this seem right -float down option. (loan, recourse, pre-approval)

[Kathryn2378]

We are building a home and locked in late November at 5.5 for 150 days. Our broker at the time explained that if we elected to pay for the float down option we could only utilize it 30 days prior to closing so we didn't pay for it. Is that standard practice? I called her yesterday to make sure our file was complete and discovered that she left right before Christmas and another broker is handling our file. He informed me that had we paid for the float down option we could have used it at any time and he could have offered 4.75 yesterday. Do we have any grounds here to insist they allow us to float down? I realize we are responsible for our decision but feel like we were misinformed. Maybe it's just time to find another lender? Thoughts? Thanks in advance.

[chet everett]

What do you mean "building a home"? Construction loan or set up with a "mass builder"? Is the lender part of their organization?

5.5 is not a bad rate, but there are more attractive out there, as you have discovered.

150 day is unusually long lock period. Not sure that the float down would always run concurrently on such a lengthy lock, but since I have seen 60 & 90 day locks with float down I imagine it could be...

Recourse? New lender is an option. Trying to get the lender you are with to make some "goodwill" effort is also a good strategy, but if it does not work have another lender that you have a "pre-approval" status with waiting to go...

Good Luck!

[Kathryn2378]

We are building with a mass builder in a master planned community. And yes, the lender is theirs as they are covering additional closing costs.

[chet everett]

The "lending people" that work at mass builders tend to not stick around very long and often really don't understand the process. You probably have to apply pressure on the WHOLE builder sales team, and that generally gets results. If you have buyers agent they might have some suggestions too.

[Modification Specialist]

I locked my rate in at 4.5% today............. If the rates go lower, I'll go to another lender........

[SmartMoney]

When are you closing? Did you pay upfront fees for your 150 day lock? (standard to charge for over 60 days). And yes, it's standard to require the float down be exercised 30 days prior to closing. And, it's never the lower market rate, it's usually 1/8% above the 60 day lock price.

How much is tied to using the builder's lender? Are there other incentives (extras, options) that would also be lost?

The builders just dodged a huge RESPA bullet that was supposed to go into effect tomorrow, January 16. The new requirement would have lifted any requirement for you to use an affiliated lender to receive builder incentives. Builders got a 90 day moratorium in Federal Courts for attorney review for a probable appeal. It sounds like you may want to watch that story closely.

What state are you in? Have you checked out the rates with another lender and priced it to see if it would pay to move the loan? If the current rates in your area for your loan are so much better, have you inquired about surrendering any deposit to relock? (We all know this discussion wouldn't be taking place if the rates had gone up.....you paid for the security for rates not to go the other direction. Win some, lose some. See if they will work with you on a new lock if you surrender the fee).

[Kathryn2378]

Thanks for all your replies. In the end, we decided to lock and will have accept the 5.5. If we go with another lender we lose 3000 in closing costs, which hurts, but it probably not worth it if we can get a much lower rate for home we intended to live in for a long time.