What's the right way to approach locking vs floating mortgage rates?

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drdavidge
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Joined: Tue Mar 20, 2007 12:06 am

What's the right way to approach locking vs floating mortgage rates?

Post by drdavidge » Tue Oct 03, 2017 9:50 pm

Hey, I recently purchased a home that is scheduled to close in December or latest January. I've been applying to multiple lenders and price/term comparing them all. I'm trying to figure out how to approach this the best way where I can limit my downside (rates moving up) but also take advantage of the upside (rates moving down). I've been full disclosure to everyone I've applied with and let them know that I am shopping around and will go with whoever can get me the best rate and terms at the time. One of the bankers I applied with suggested that I lock with one lender and float with another. My first thoughts were that this is a pretty good approach, especially if one of my lenders has a favorable rate right now and will give me a "free" lock out to the latest date I will be closing, and then I can float the other. I understand that these locks aren't really free, but I am just talking about no upfront out of pocket costs. Do you think this is a good approach, or is there a better way to go about it? Am I missing something here in the thought process? Thanks.

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jabberwockOG
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Re: What's the right way to approach locking vs floating mortgage rates?

Post by jabberwockOG » Tue Oct 03, 2017 10:20 pm

Most lenders will require a 300-400 non refundable application fee....other fees might become due and chargeable as you move through the loan process. You could lock with one company and float with another but it might be difficult to get exact same costs for a pure apples to apples comparison but might be worth a try. Unless you have a way to confirm actual rates you have to believe whatever the lender tells you. I'd get quotes every 2-3 days and lock on that quoted rate when you apply.

Be aware that some lenders will tell you your rate is "locked" but they actually don't lock it in hoping to get a better rate on your loan and then close your loan above par (without telling you) increasing their profit on the deal. The downside is that if rates go up significantly an unscrupulous lender will suddenly come up with BS reasons why they can't continue to process or close your "locked" loan so you will have to reapply with another lender at higher rates. Most reputable non fly by night lenders would not do this but it's best to stay away from potentially sketchy bargain basement small time lenders for this and other reasons.

gpburdell
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Re: What's the right way to approach locking vs floating mortgage rates?

Post by gpburdell » Tue Oct 03, 2017 11:08 pm

I'm in a similar situation. I just signed a contract for new home construction, but the expected closing isn't till April of next year. The company I got my pre-approval through said while there are products to lock in that far out; they recommended against it as the rates, points, fees, etc are significantly higher than something for 90 days.

So my plan is to wait till middle of January before applying for a mortgage. Hopefully rates haven't gotten up significantly by then.

drdavidge
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Joined: Tue Mar 20, 2007 12:06 am

Re: What's the right way to approach locking vs floating mortgage rates?

Post by drdavidge » Tue Oct 03, 2017 11:10 pm

Thanks for the info. I'm using several big name banks so hopefully I don't have a shady issue like that. Right now all of the people I applied with have no application fee, though they want me to either pre-pay or reimburse them for the appraisal. But, they were all willing to hold off on the appraisal until further down the line. So right now, with no out of pocket cost, I have a few applications out there with pre-approvals (which I may move further along to a full application), and few full approvals with commitment letters and an appraisal contingency.

drdavidge
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Re: What's the right way to approach locking vs floating mortgage rates?

Post by drdavidge » Wed Oct 04, 2017 9:02 pm

Any more thoughts?

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MilleniumBuc
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Location: Florida

Re: What's the right way to approach locking vs floating mortgage rates?

Post by MilleniumBuc » Wed Oct 04, 2017 9:14 pm

Once you lock that long, some lenders will have fees in the document you sign about closing with someone else. Just read the agreement and understand it fully before locking in.

Cash
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Re: What's the right way to approach locking vs floating mortgage rates?

Post by Cash » Sat Oct 07, 2017 4:39 pm

Floating/locking reminded me of my days of buying and selling individual stocks. No one can predict future mortgage rates, so you're really just gambling and hoping that it goes your way. I knew that my chosen lender repriced daily at 10 a.m. So would go to mortgagenewsdaily.com, see which way things were headed, and make a decision about whether or not to float another day. In the end, you're probably just better off locking and not checking the rates again.

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jabberwockOG
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Re: What's the right way to approach locking vs floating mortgage rates?

Post by jabberwockOG » Sat Oct 07, 2017 5:34 pm

For lenders that don't self finance (which is most of them) the rates for the day that they quote typically are published on a "rate sheet" mid morning, and sometimes again mid afternoon. The rate sheet loan rates can change by 1/16s or sometimes more each day, or rate remains the same but discount point offers/amounts change, or the rates and points can remain unchanged for many days.

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