Interest Rates and Lock Extensions

Good Morning and Happy Thursday to you! It has been a pretty exciting and busy week and I want to thank those of you who have entrusted in me to take care of your clients financing needs.

As of this moment interest rates are still where they were yesterday and looking FLAT! So read what I wrote yesterday if you want rates for today.

I am really liking the normal market we are in right now. I will call it normal because it is as close to normal as any market I can remember in the past eight years. So in a normal market there are the challenges of contingent offers and with contingent offers sometimes we have delays. Delays could be caused by the seller, the buyer, the agents (No I did not say that!), escrow, or even the lender. So what happens when a rate lock expires?

• Who is responsible to pay for the rate lock extension? Nobody is truly responsible for a rate lock extension, but somebody has to pay for it.
• Who can legally pay for the extension? Anybody that is a party to the transaction can pay for a rate lock extension.
• What happens to the rate and what is the cost of a rate lock extension? Rate lock extensions vary depending on who the investor is. We have some that will extend for free if the market improves and they will charge .250% if the market is slightly worse or .375% if the market is dramatically worse. We have others that charge .125% for every 7 days and there are many other ways that banks price extensions as well.
• Can the rate go up? Absolutely, but if the lender is using the right investors, then it should not go up.
• Can the rate go down? It could, but only if there is a dramatic move down in the interest rates. Usually we LOCK a loan which means a rate is locked in and changing investors to get a lower rate is going to slow down the process even further. So the answer is a soft yes on a case by case basis.
• What should I watch out for?
• There are so many things to watch out for. There are some lenders that like to profit off of the hardship of others and charge through the nose if a rate lock expires.
• There are some Lenders that have a no extension policy.
• I have seen Lenders that forget to lock and then when the client gets to the close he has a higher rate.
• Lenders can be like contractors. "Well you are making changes so we need to charge you this much instead of what we said originally!”
• One last thing of note about rate lock extensions: I am too big of a wimp to charge them to my client! I will try to get money from the seller if it is their fault, but I almost always pay for the first 15 days of extensions and when I do that I explain to the client that the next one will cost X and that one is on them if we go that long.

Just remember that a lender you refer is a reflection of you and a lender you don't refer can also reflect badly on you. Be strong, be sincere and let your clients know why it is important to use a professional that you refer. Remember that when you align yourself with the best in the business you will make your business the best!