Posts Tagged ‘free float down’

Lock and shop with rate float down

April 25, 2017

Last time we discussed the competitive market for home buyers. I suggested getting underwritten prior to making an offer on a home. That way the offer can say the buyer is “approved” and can close in about two weeks (only need the appraisal!). When I talk about this option with clients, they also ask about whether they can lock the interest rate. Most lenders/banks prefer a buyer be under contract to purchase a home, but that isn’t the case with Lock and Shop.

Buyers can lock in their interest rate today without a purchase contract, and then go out looking for a home. The program typically works like this:

  • We start the loan process as if we have a contract to purchase a home.
  • We submit the loan to underwriting for approval, and can lock the borrower into a 60 day rate lock.
  • This provides plenty of time to find a home, get under contract, and complete the closing

This is a great program for buyers. They can go ahead and get underwritten for a home purchase. They can also lock in a rate now, and not feel so pressured to find a home before rates could possibly get worse. With a 60 day lock, there really isn’t a rush on either side of the equation (finding a house and then getting loan approval). 60 days is more than enough time for both!

On top of that, there is a one-time FREE float down on the rate lock. The window to use the float down is within 30 days of closing (or rate expiration) and 8 days prior to closing (or rate expiration). If interest rates have improved by 0.250% or more, the rate can be lowered to the current market. That’s it. No fees and no tricks. There is a roughly 3-week window to use the float down, and rates must be improved by 0.250% or more.

If you’d like to learn more about the lock and shop program for a home purchase in Georgia, you know where to find me!

Federal Reserve’s impact on rates

March 21, 2017

I feel like I spend a lot of time devoted to the topic of the Federal Funds Rate. The main reason is the misconception out there when it comes to the Federal Funds Rates. Last Wednesday, the Feds raised the Federal Funds Rate again. Every time this happens, I get calls and emails with people worrying about mortgage rates going up. That isn’t necessarily the case.

Mortgage rates are not determined by the Federal Funds Rate… car loans, credit card rates, second mortgages… those are impacted by the Federal Funds Rate.

Mortgage rates are determined by the value of Mortgage Backed Security Bonds (MBS bonds). As these bond values go up, mortgage rates go down. When these bond values fall, mortgage rates go up. Typically, when the Federal Funds Rate increases, it should help mortgage rates improve. Why?

MBS bonds hate inflation… I mean they can’t stand inflation. As inflation rises, MBS bond values plummet and make interest rates worse. As the Feds increase the Federal Funds Rate, it helps fight inflation. This, in turn, helps MBS bond values to rise, and mortgage rates to improve:

  • the Federal Funds Rate increased in December 2015. Over the next few months, mortgage rates improved by 0.500%. Rates stayed around these levels for all of 2016. Rates got worse at the end of 2016 after the election fueled a major stock market rally. That triggered another typical trend with rates… when stock values go up, bonds go down, and mortgage rates go up.
  • The Funds Rate was increased again in December 2016, and mortgage rates improved by 0.125% in the 6 weeks between Fed meetings.
  • We are about a week past the most recent rate increase by the Fed (third time since December 2015). So far, mortgage rates have improved by another 0.125%

What does this mean? When you hear a story about mortgage rates rising because of the Federal Funds Rate going up, don’t panic. The Funds Rate may go up, but mortgage rates could improve.

If you are looking to buy a home in Georgia, contact me today to get started. We have two tools to help you in an ever-changing rate market.

  • Float Down: Should rates improve after we’ve locked your rate, we can float it down at no cost to you one time during the loan process. If rates improve by 0.250% or more, we are within 30 days of closing, but 8 days prior to closing, we can float the rate down to current market value. That’s it. Easy! We have a three-week window to take advantage of this.
  • Lock-and-Shop: Worried that rates might go up? Don’t be. We can lock a rate for 60 days without being under contract to purchase a home. The rate is locked, find a home, and we start the loan process. The Float Down option as described above also applies to the Lock-and-Shop. So, you can get the protection of locking the rate, but also the opportunity to lower the rate should mortgage rates improve. The rate will not get worse so long as it is locked.

It is as simple as that!

Feds have opposite impact on mortgage rates

February 22, 2016

blog-author-clayjeffreys3

Seems the increase of the Federal Funding Rate didn’t have the negative impact on mortgage rates that many of us read about/heard about in the media. Since the Feds increased the Federal Funding Rate, mortgage rates have improved by at least 0.375%. Mortgage rates now sit at their lowest point since the beginning of 2015.

CEO-PIC

As bonds values go up, mortgage rates go down.

Why did mortgage rates improve if the Federal Funding Rate increased by 0.250%?

As previously discussed in this blog, mortgage rates are determined by mortgage backed security bonds. As these bond values trade, mortgage rates change… when bond values go up, rates go down and vice-versa. Also, when stocks endure bad times, bonds excel. This means as stock values drop, bond values rise, and in-turn, mortgage rates improve.

We all know what happened on Wall Street in January/early February. The Dow posted some historically bad numbers. Whether people were afraid of the price of oil, the oil glut, the Feds raising the Federal Funding Rate, or something else, stock prices plummeted, and so too did mortgage rates.

How should consumers respond:

  1. Don’t worry about interest rates getting better after you’ve locked in a rate. We have a float down option on our rate locks. If rates improve, your locked rate may be able to improve too. The rate will not get worse so long as it is locked. In other words, your rate could get better, but not worse. I’ve had several clients take advantage of this feature in the past two months.
  2. If you are thinking of buying a home (or refinancing), now would be a good time to get serious about it. Mortgage rates are not far off of their all time historic lows. Even if rates improve, you can use the float down option I just described.

Looking to buy/refinance a home in the state of Georgia, contact me today to get started. We’ll get through the prequalification process and get you ready to buy your new home!

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Rate Float Down

June 11, 2013

blog-author-clayjeffreys2

My last two posts detailed rising interest rates over the past month. Now buyers are not only looking for homes, but also wondering when is a good time to lock. I mean, rates rose dramatically. Do I think there will be a rebound lower?

If there was only a way to take the guesswork out of when to lock a rate! There is…

My clients can use a onetime FREE float down on their locked rate. This applies to my clients whether they are buying a new home OR refinancing their existing home. How does it work?

Don't worry. Falling rates is a good thing!

Relax. Falling rates are a good thing!

The float down can be used once an interest rate is locked, and we are within 30 days of closing. If interest rates improve from the time of lock up until 6 business days prior to closing, we can float the rate down to the current market.

Most of the time, clients wind up lowering their rate 0.125%… sometimes it is a 0.250%… I’ve even had a client lower their rate 0.500% from the lock rate to the floated down rate. So whether there is a slight improvement OR a dramatic improvement in interest rates, we can make up the difference even if the interest rate is locked in!

How does one take advantage of the rate float down option? Well, first, you’ve got to get started! Whether you are looking to buy a home or refinance your current home, you need to be prequalified. Then we lock in your rate and just wait and see. You don’t have to worry about if you timed the market right:

– if rates get worse, your rate is locked and not getting worse
– if rates improve, you can float down to the lower rate

There is no reason to delay locking in your interest rate. Contact me today (scroll to bottom of page for my info) to get started. I’ll take the worry of timing the market out of the equation. That will allow you time to focus on packing, moving, and painting some rooms in your new home!

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Going Up? Down!?!

February 15, 2011

Sometimes going down isn’t the worst thing in the world… lower prices, or in this case, lower interest rates!! Let me explain.

One of my recent posts discussed the Lock and Shop program. Click the link for all the details, but in short, buyers can lock in a rate for 60 days prior to even looking for a home. This way the buyer knows their rate won’t get any worse and can put their focus on finding a home instead of trying to time the rate market.

A common question I get about the Lock and Shop program goes something like this… doesn’t a 60 day rate lock mean a higher interest rate? The answer is yes, it typically does mean a higher interest rate. That isn’t a problem when you pair it with a FREE one-time rate float down option. Let me explain.

Initially, my clients can lock in their interest rate today using the Lock and Shop program. Then once we are within 30 days of closing, if rates have improved, we can float my client’s locked interest rate down to a lower interest rate. There are no gimmicks, hidden fees, or anything along those lines associated with the one-time float down option.

The float down option is also available to buyers or home owners refinancing who did NOT use the Lock and Shop program.

How does one take advantage of the rate float down option? Well, first, you’ve got to get started! Whether you are looking to buy a home or refinance your current home, you need to be prequalified.

During the initial consultation of the prequalification process, we can determine if using the Lock and Shop program makes sense OR just move forward with a rate lock knowing with either course of action we can always float that interest rate down if the market improves.

Take the worry out of when to lock your rate. Use the FREE one-time float down option, and that is a program I am able to offer my clients.