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I wish I could claim credit for the stress/exercise line, but I can't. Nonetheless, rate locks seem to be responsible for most of the stress my purchasing clients experience and, consequently, pass along to me and my staff.
Each and every time I sit with clients to sign contracts, I give them a letter designed to address issues they will face during the purchasing process. The letter includes a paragraph on "rate locks", a mortgage device which has me convinced that the banking industry is in cahoots with the drug and alcohol industries, because rate locks make us all crazy.
My letter to my clients says: "Rate Lock: You will be given the opportunity by your lender to lock your rate. Since these rate locks expire, it is imperative that you not lock your rate unless and until you are certain that you will close during the lock period".
Not only do I give this letter to my clients, I read it to them as well and emphasize the importance of NOT locking the rate too soon. Yet it seems as though the buyers run (not walk) to their lender afterwards to lock the rate! It amazes me that most buyers do understand that the typical time from contract to closing is 60-90 days, yet they still hurry to lock prematurely.
Now, that the rate has been locked too soon, we have to struggle to try to close before the rate lock expires; not an easy thing to do, especially in coop purchases where coop approval is necessary. There are so many unpredictable factors to deal with which impact on the timing of a closing, not the least of which is the seller's "agenda". Is the seller having a house built, moving to Florida or Arizona, going into a rental etc? The dynamics of a real estate deal, give a typical buyer very little "leverage" to compel a seller to close in a timely manner without the threat of litigation (not a pleasant thought).
While it's true that many lenders "offer" a rate lock extension, these extensions do not come inexpensively.
OK....so let me say it again "Don't lock the rate!" At least don't lock it knowing it will expire before we close. Or....be prepared to quietly and without objection pay the fees.
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2 comments:
You forgot one other stressful factor in locking rates - An abysmal seller's attorney who doesn't care about when closing occurs. One never knows when this factor will severely complicate the process. If anything, it made me realize that good lawyers are hard to find. You're one of the few, Bob!
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