Posts Tagged ‘lock and shop’

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!

How World Events Impact Mortgage Rates

March 18, 2014

blog-author-clayjeffreys3

What do protests in the Ukraine/Thailand/Venezuela, the Crimea dispute, and poor economic news from China have in common? In some way, shape, form or fashion, they impact mortgage rates.

“How” this happens is the better question.

A general rule of thumb with interest rates is this… When there is negative/bad news (poor economic outlook, rumor of war, unrest), mortgage rates tend to improve while stocks lose value. When there is positive/good news (good economic outlooks, increased hiring, resolution to unrest), mortgage rates tend to get worse while stocks gain value.

Notice I used the words like “general” and “tend” in the previous paragraph. With the events over the past several weeks, volatility and inconsistency reign supreme. Let’s look at some examples:

– On March 13, 2014 – China released economic news that continues to show a slow down in their economy. Meanwhile back at the Crimea Peninsula, Russian troops were conducting war games/exercises.

The result? The Dow lost well over 200 points, while mortgage bonds had one of their larger single day increases of 2014. These negative events/news stories helped interest rates improve.

– On March 17, 2014 – It is announced that Crimea has voted to join Russia. This lead to the Ukraine and Western countries threatening sanctions, Russia stating its support for the move, and a tenuous situation becomes increasingly complex and strained.

The results? The Dow endured further losses? Nope. Quite the opposite. The Dow had gains of almost 200 points with today’s futures showing even more gains. Typically, news like this would hurt stocks and help rates, but interest rates worsened on Monday.

The markets seem to be currently reacting to events in unexpected ways. This makes forecasting the direction of mortgage rates more difficult than normal.

How should you respond if you are in the market for a new loan? I have two ways:

1. Lock and Shop: go ahead and lock an interest rate for an extended time without having a home under contract. Once you find a home and are within 30 days of closing, you can then use a float down if interest rates are better than your original lock.
2. Rate Float Down: whether or not you use the Lock and Shop program, should interest rates improve by 0.250% or more from your original rate lock, you can float down to the current rate for free. There is no fee to use this feature. The float down can be used once you are within 30 days of closing and prior to 7 days before closing.

Using either of these programs gives you the best of both worlds… should interest rates get worse, your rate is locked! Should interest rates improve by 0.250% or more, you can still float down to the lower interest rate. This protects you regardless of what happens with the latest US jobs report, or economic outlooks in emerging markets, or the latest events in Crimea… your rate is protected.

To learn more about the free Float Down or the Lock and Shop program, contact me today. I can help you protect your rate now even if you haven’t found the home of your dreams.

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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.

Lock and Shop

February 1, 2011

When someone contacts me to get prequalified for a loan, one of the first questions involves locking in their interest rate. Traditionally, lenders do not allow borrowers to lock in an interest rate until they have a contract on a home. The rate lock is “attached” to a property and not a borrower.

Well, not everyone sees it that way!

We have a program known as “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:

  • I prequalify a buyer to purchase a home.
  • Once prequalified, we can lock the borrower into a 60 day rate lock.
  • 60 days is a good time frame. This provides roughly 30 days to look for a home AND then 30 days to get a loan approved once there is a purchase contract. Plenty of time for both!
  • While I can lock in an interest rate prior to having a contract, underwriting will not commence until an executed purchase contract is provided.

This is a great program for buyers. They can go ahead and 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!

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