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Old 02-08-2008, 02:19 PM
 
42 posts, read 135,551 times
Reputation: 14

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Thanks in advance for anyone who reads. I am looking to understand if I'm missing something obvious about choosing between two banks/lock-in scenarios.

There are various lock-in scenarios offered by various large banks. The two banks I am considering offer the following:
  • Bank1: Lock in today/ASAP, with 6-month lock, 1 point "deposit"
  • Bank2: Lock in within 45 days of closing, with 60-day lock
The buying scenario is the following:
  • new construction
  • 4-5 months are needed to finish off the house being built
  • Bank in scenario 2 offers small discounts (couple hundred dollars on fees, and 0.1% on rate)
  • most other costs are a wash
  • assume banks' service is a wash as well
I am assuming that the main consideration is which way I think interest are going, and so I should look at what risk I am willing to take on rate direction.

A second consideration might be that I will know better the closing schedule as the months go on, and so the Bank2 scenario gives me a better chance of making sure I'm within the lock window (vs. closing date) when I lock-in, thereby avoiding a fee to re-float.

A third consideration would be whether (assuming I wait until closer to closing) a much higher interest rate will affect the bank's perception of my ability to pay back the loan that they had approved me for.

But am I missing something else obvious as far as what to consider?

[By the way, if these are three things I need to consider and nothing else, then since I do not know which way rates are going, and I'm not a confident predictor of such, I'm thinking I should take the "sure" discounts and just go with scenario 2.]
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Old 02-08-2008, 02:21 PM
 
42 posts, read 135,551 times
Reputation: 14
SORRY, I didn't mean to click on the poll button
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Old 02-08-2008, 03:28 PM
 
Location: Charlotte, North Carolina
5,137 posts, read 15,669,972 times
Reputation: 1008
by the way..you lose the point.

i would rather wait till around the closing date.
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Old 02-08-2008, 06:13 PM
 
42 posts, read 135,551 times
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Thanks for the insight. I coulda sworn he told me that goes toward all the costs, but thanks for pointing out. Shows I need to dig more, and learn better.
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Old 02-08-2008, 06:30 PM
 
Location: Charlotte, North Carolina
5,137 posts, read 15,669,972 times
Reputation: 1008
it does goes towards the closing costs....but if you walk away you lose it.

you pay upfront...so it's a wash at the closing table.

it's like paying the appraisal outside of closing....
You pay 350 to the appraiser...and on the HUD you will see the 350 fee...but next to it you will see POC paid outside of closing.
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Old 02-10-2008, 02:11 PM
 
42 posts, read 135,551 times
Reputation: 14
Thanks, that's the impression I was under. The deposit would be a dis-incentive to me so that I would not walk away.
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Old 02-25-2008, 09:04 PM
 
Location: Roanoke, TX
57 posts, read 199,281 times
Reputation: 21
I have a similar offer from the builder's captive finance company: lock whenver you want & they will lock the rate while the house is being built. There's one opportunity for a float down within 30 days of closing. I do not know what the cost associated with this is, but based on what you're talking about, it could be a "deposit" of 1%? The builder is Drees Homes in the DFW area & their bank is First Equity Mortgage.

Any insights on this program, why one would/would not want to do it?

I have great credit (750 plus), would be doing a standard mortgage with between 10-15% down. Have not yet negotiated price or closing costs, as for all I know my company that would be relocating us if we do this deal might pay something: offer letter is to come in the next few days. Loan amount would be a bit more than $200k on a $250k approximately (likely a bit less, we haven't spec'd options yet) home.

Thanks!
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