When to rate-lock a mortgage?
May 18, 2018 8:59 PM Subscribe
I'm applying for a mortgage, whose rate is currently floating. The loan officer claims that the rate will move unpredictably and that we should email daily for an updated quote until we are ready to lock the rate. We've detected a pretty obvious pattern over the last few weeks: they reduce the fee waiver a few hundred dollars each time, and then when the waiver reaches zero they raise the rate 0.125%. Is the loan officer just fucking with us?
We're currently being quoted 4.625% on a 30-year, $500k mortgage. We have no idea whether that's in line with the market, or how we would find out short of applying for mortgages with lots of other banks.
It has not escaped us that as we get deeper into the underwriting process, we have more to lose by switching to a different mortgage provider, and that probably gives the bank leverage to force a higher rate on us.
Should we lock the rate before it rises? Should we hope it goes down in the next month and a half before we close? I have no idea what I'm doing.
We're currently being quoted 4.625% on a 30-year, $500k mortgage. We have no idea whether that's in line with the market, or how we would find out short of applying for mortgages with lots of other banks.
It has not escaped us that as we get deeper into the underwriting process, we have more to lose by switching to a different mortgage provider, and that probably gives the bank leverage to force a higher rate on us.
Should we lock the rate before it rises? Should we hope it goes down in the next month and a half before we close? I have no idea what I'm doing.
Despite what your loan officer may hint at, there is absolutely nothing wrong with you shopping around now and having multiple applications and loan offers.
Remember that your loan is an opportunity for banks to make money, not doing you a favor, so you should absolutely do your research and ask for concessions to ensure you're getting the best possible deal. Get multiple offers. Make them beat each other. Go with the best terms.
Interest rate, fees on rate lock, extensions etc can all be negotiated.
posted by Karaage at 9:50 PM on May 18, 2018 [1 favorite]
Remember that your loan is an opportunity for banks to make money, not doing you a favor, so you should absolutely do your research and ask for concessions to ensure you're getting the best possible deal. Get multiple offers. Make them beat each other. Go with the best terms.
Interest rate, fees on rate lock, extensions etc can all be negotiated.
posted by Karaage at 9:50 PM on May 18, 2018 [1 favorite]
I just shopped around on Monday. Our high service, local broker was quoting us 5.0. Slightly appalled, I used Bankrate.com to find a random bank in Wisconsin that had an amazing special going on. (I can send you their name if you want.) They offered 4.375 with $0 in origination charges (section A on a Loan Estimate). I sent that to my current broker. While waiting to see if they could match it, I randomly bumped into another local broker with an advertising kiosk in my work cafeteria. Knowing about the Wisconsin deal, and because they offer a special deal for people at my workplace, he said they could offer 4.5 with no origination fees and a $250 credit toward appraisal or other expenses. Ultimately, our original broker matched 4.375 but couldn't reduce their original $1500 origination fees (unless we wanted a higher rate with lower fees there). We decided we were willing to spend $1500 for the security of using a very trusted, known local entity, not having to switch midstream, and out of appreciation for all the help over the years.
Are you under contract? If so, check with your realtor or in your purchase contract for when your contingencies expire and when the loan needs to close. Our contingencies expire May 27, and as of this past Monday, everyone was saying that it wasn't too late to switch to them if we promised to send them every piece of paperwork within 24 hours.
Assuming you have enough time to switch brokers, I'd shop around, find a good deal, and use that to negotiate a good rate with whichever broker you want to work with, then lock it there.
I think 4.625 isn't out of step with the market but also isn't the best deal you can find, if your situation is comparable to ours. (We have good credit but aren't putting a lot down but aren't buying at the max of what they'd qualify us for.)
Hope this helps. Let me know if you have other questions.
posted by slidell at 10:51 PM on May 18, 2018
Are you under contract? If so, check with your realtor or in your purchase contract for when your contingencies expire and when the loan needs to close. Our contingencies expire May 27, and as of this past Monday, everyone was saying that it wasn't too late to switch to them if we promised to send them every piece of paperwork within 24 hours.
Assuming you have enough time to switch brokers, I'd shop around, find a good deal, and use that to negotiate a good rate with whichever broker you want to work with, then lock it there.
I think 4.625 isn't out of step with the market but also isn't the best deal you can find, if your situation is comparable to ours. (We have good credit but aren't putting a lot down but aren't buying at the max of what they'd qualify us for.)
Hope this helps. Let me know if you have other questions.
posted by slidell at 10:51 PM on May 18, 2018
how we would find out short of applying for mortgages with lots of other banks.What you need to do to find out what the existing rates are from many different banks and other lenders is to work with a mortgage broker.
Ask around in the usual places (friends, co-workers, whoever in your circle locally) who they've had success with and you'll be on your way. Many moons ago it worked out very well for us, saving both fees and points at a great rate. More recently working with a local bank it turned out the best for us.
As in everything else in life, you'd be surprised at what's negotiable.
posted by scooterdog at 4:02 AM on May 19, 2018
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No, the market is just trending towards higher interest rates. This is not exactly a secret. If you think that trend will continue, you should lock now. If you think that trend will reverse, you should lock as late as possible (ie, right before you close).
If you have some way of predicting the mortgage interest market, you are smarter than all of the investors out there. I don't think that's the case.
For what it's worth, 4.625% on a $500K 30-year mortgage seems quite plausible. Shop around if you want to confirm that. I like better.com and have found in my area it consistently offers the lowest rates available.
posted by saeculorum at 9:17 PM on May 18, 2018