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So, I need to lock my rate. My LO tells me that that there is a "program" where I lock in to a rate .125 higher than the current rate, but if the rate drops I can get a lower rate (no matter how much it drops). There is no fee for this program.
Is this a good idea? Is it worth it to take an 1/8 hit on the hopes of the rate dropping lower in the next 30 days?
Most lenders today have a float down policy where once you lock in a rate, you can float it down once before closing but rates have to move .25% and they only float you down .125%.
I wouldn't suggest you take a 1/8 higher today, because what if rates dont go lower... you have a higher rate. By the way, i dont know of any lenders with that policy.
As usual, thanks Victor for the information. It is from Franklin American. I thought it didn't make sense myself, but wanted to get confirmation. It seems a bit crazy to lock in to a higher rate in the hopes rates drop. Especially when you need a 1/8 drop just to get back to what the rates are today.
Most lenders today have a float down policy where once you lock in a rate, you can float it down once before closing but rates have to move .25% and they only float you down .125%.
I wouldn't suggest you take a 1/8 higher today, because what if rates dont go lower... you have a higher rate. By the way, i dont know of any lenders with that policy.
I'm going to be really pissed off if it turns out they offer this float down. If I did this program I would need rates to drop by .25 to get ahead as would have to lock in at .125 higher to start with. So a .25 decrease would get me to the exact same place as the float down, but with the float down I don't have the risk of the higher rate to start.
Right now rates are at worst point for this whole year..
0.125 is pretty big hit at already relatively bad rates. For example, many lenders will remove origination fee (1 point) for such rate increase, so cost of this 'service' is not small... would you rather get 0.125 higher rate and no origination fee?
There is no origination fee. I can either lock the current rate (5.25) or lock in at 5.375 with the possiblilty that rates will lower.
With how much time? If you have less than 30 days, I would go w/ the 5.25%, if over, 5.375%, I'd do the float down. What it all boils down to is $8 per 100K per month.
With how much time? If you have less than 30 days, I would go w/ the 5.25%, if over, 5.375%, I'd do the float down. What it all boils down to is $8 per 100K per month.
Closing is on April 30th. I locked in at 5.25 last night.
No, don't second guess yourself. Even those of us in the business never can get it dead on, and I have a streaming MBS screen going all day long. Look at it as an odds situation: 3 things can happen. 1) stay the same, 2) get worse, 3) get better. That means there is a 66% chance rates will stay the same or get worse. Which odds do you want? Anything can happen before rates are issued tomorrow.
True, tomorrow things are on track to get marginally better tomorrow, but not by that .125% add on. And nothing to get upset over.
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