Lock now if closing isn't for 4+ months?

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I’m in the process of building a home. I can lock in now at 4% for 165 days, at a cost of around $600. At 135 days, I could get 3.875% (for same cost), but that’s cutting things too close for the house completion (mid Feb). Any thoughts on locking before Thursday’s Fed meeting? Any insight how much rates might go up in the next few days to 4 months? Thanks

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Hey Thomas,

Ordinarily, I wouldn’t be too thrilled about locking that far out from closing, but that pricing seems pretty danged competitive. It would be interesting to know what price you could currently get on a 60-90 day lock, just to see if it was significantly better than the extended pricing. I presume the $600 cost is charged upfront, and non-refundable? That’s typically the case for locks of that length. Do you have any float down options (meaning if rates improve between lock date and closing your pricing could improve by at least a portion of the gains)?

As far as “how much rates might go up in the next 3 days to 4 months”, anyone who told you they knew would be lying. In general, economic growth translates to higher rates, low inflation and/or economic duress helps keep rates down. If I were GUESSING, I’d say the world’s economies aren’t going to miraculously cure themselves anytime soon, but that is about all I’d be willing to state.

Bottom line, if those were my options, and I was happy with 4% (which is the “best execution rate” for most lenders now on 30 day locks!), think I’d jump on it. You could sure do worse!

Answered over 1 year ago
Ted Rood
1480 1 8
over 1 year ago Thomas Miller said:
 

Thanks Ted, appreciate the comments. I haven’t checked on shorter locks, but the comment was made a few weeks ago that I could’ve gotten close to 3.75 for a 30 day lock. The $600 is upfront, non-refundable. If rates go down, I can re-lock, but I would be out the $600. Forgot to mention, I got a message from my banker yesterday that I can get the 3.875 at no charge for around 110 days.

I would certainly be happy with 4%, but every little bit lower makes a big difference too. My one thought was to float, because if rates do go up, I “should” be able to still get around 4% as we get closer to closing. And if rates stay flat, I could hopefully get under 4% for shorter locks. But I guess that’s the big unknown, how fast and how much will rates go up.

over 1 year ago Ted Rood said:
 

@Thomas Miller you’re correct that shorter term locks are priced better than longer terms. In your case, it sounds like the adjustments may be smaller than usual, given the aggressive long term pricing. I’d start by asking what the differences are for different lock periods.

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What I always ask people is this:

Which situation would upset you more?? If you locked in now and later on rates went down? Or if you didn’t lock in and they went up? Let the answer to that question determine your course of action!

Answered over 1 year ago
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