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Lock in on pre-sale advice?

By Matt Goyer September 13, 2007

Lisa recently asked about mortgage locks and pre-sales in the forums:

I have bought a pre sale at Gallery. Their perfered mortgage company- Homestone, tells me that I do not want to lock in with a completion date so far out (projected July 2008) They allow 1 float down with in 60 days of closing. Mortgage Broker says that as the year goes on, mortgage rates will drop and I will not be able to float down – since it will be further than 2 months out. Was wondering other people’s thoughts. And also, if any one has worked with Homestone and what they think.

For my two new construction purchases I had the option to lock and didn’t. For the first one that turned out to be a fine decision, I didn’t go with the onsite lender and rates did drop. For the second one I should have locked because of this whole mortgage melt down mess.

The advice that has since been given to me is that what you should do is first find out how much it will cost if you break the lock and go with another vendor (I’ve found it to be between $200-$500) and then lock with them based on stated income (they tell me that you can go from stated income to full doc but you can’t go from full doc to stated income). Then no matter what happens you have something but if you find something better then pay your penalty and go with another lender.

But I’m sure some readers know way more about this than me…

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16 responses to “Lock in on pre-sale advice?”

brian says:

September 13, 2007 at 4:58 pm

Rick Phillips with Homestone is a straight shooter.
brian says:

September 13, 2007 at 8:58 am

Rick Phillips with Homestone is a straight shooter.
DMG says:

September 13, 2007 at 5:46 pm

they were the preferred lender on my project as well, however I chose not to use them as I was not impressed with the initial package they presented. I asked for their best offer and long story short, it was definitley not.
DMG says:

September 13, 2007 at 9:46 am

they were the preferred lender on my project as well, however I chose not to use them as I was not impressed with the initial package they presented. I asked for their best offer and long story short, it was definitley not.
mhays says:

September 13, 2007 at 7:38 pm

I prequaled through Homestone at Gallery because it was required, but will almost certainly use WaMu, where I got my loan for my current place.

My guy at WaMu told me last week than I shouldn’t bother locking in a rate yet. So far so good, as rates have gone down already.
mhays says:

September 13, 2007 at 11:38 am

I prequaled through Homestone at Gallery because it was required, but will almost certainly use WaMu, where I got my loan for my current place.

My guy at WaMu told me last week than I shouldn’t bother locking in a rate yet. So far so good, as rates have gone down already.
Jon H. says:

September 13, 2007 at 7:40 pm

I can’t speak intelligently about Homestone.

I can tell you that there are rate lock programs out there that allow you to ‘float’ down to the rate of the day about 15 days before closing. Further, I can tell you that your rate lock should cost you $0… only a deposit. Finally, I can tell you that it is not too early to lock your rate, and that the days of stated (liar loans) will soon come to an end. That’s how we ended up in this mess!

Shop around, but make sure that when you talk to lenders, they can do the following:

1. Not ‘switch-out’ your loan… this forfeits your $$ deposit
2. Make sure they waive your Fannie Mae 1027 and 1028.
3. Make sure you know they will be around in a year!

My two cents!
Jon H. says:

September 13, 2007 at 11:40 am

I can’t speak intelligently about Homestone.

I can tell you that there are rate lock programs out there that allow you to ‘float’ down to the rate of the day about 15 days before closing. Further, I can tell you that your rate lock should cost you $0… only a deposit. Finally, I can tell you that it is not too early to lock your rate, and that the days of stated (liar loans) will soon come to an end. That’s how we ended up in this mess!

Shop around, but make sure that when you talk to lenders, they can do the following:

1. Not ‘switch-out’ your loan… this forfeits your $$ deposit
2. Make sure they waive your Fannie Mae 1027 and 1028.
3. Make sure you know they will be around in a year!

My two cents!
fooman says:

September 13, 2007 at 9:12 pm

This may be a dumb question, but given the rate in which lenders are failing and loan products are vanishing, are you guys adding a financing contingency?

Maybe we are not yet at the point where builders would agree to this, but signing something with no way to get out if the lending situation goes sideways just does not seem very prudent to me.
fooman says:

September 13, 2007 at 1:12 pm

This may be a dumb question, but given the rate in which lenders are failing and loan products are vanishing, are you guys adding a financing contingency?

Maybe we are not yet at the point where builders would agree to this, but signing something with no way to get out if the lending situation goes sideways just does not seem very prudent to me.
Jeff says:

September 13, 2007 at 11:00 pm

Long-term locks typically require a 1% deposit that is credited back to you at closing (if you close with the locked company). If you switch companies, you typically lose your 1% deposit. This is because it costs the lender to secure your money for that period of time.

Long-term locking will not always protect you from the changing guidelines. Many lenders will make a change and specifically state that all loans locked under the previous guidelines must be funded by X date.

For working with Homestone vs. Wamu vs. any other lender, all lenders basically have access to the same interest rates and pricing, so if someone is offering a much lower rate, they are just discounting the amount of money they’re making on your loan.

For the person that was not impressed with the initial package presented by Homestone as the preferred lender and chose to use someone else, I’m curious where you bought.
Jeff says:

September 13, 2007 at 3:00 pm

Long-term locks typically require a 1% deposit that is credited back to you at closing (if you close with the locked company). If you switch companies, you typically lose your 1% deposit. This is because it costs the lender to secure your money for that period of time.

Long-term locking will not always protect you from the changing guidelines. Many lenders will make a change and specifically state that all loans locked under the previous guidelines must be funded by X date.

For working with Homestone vs. Wamu vs. any other lender, all lenders basically have access to the same interest rates and pricing, so if someone is offering a much lower rate, they are just discounting the amount of money they’re making on your loan.

For the person that was not impressed with the initial package presented by Homestone as the preferred lender and chose to use someone else, I’m curious where you bought.
Mike says:

September 19, 2007 at 6:46 am

I’m guessing that last comment was from Jeff Bell, a Homestone Site Lender for Gallery.

Countrywide also offers up to 18-month locks with the previously mentioned float down option. You basically pay the non-refundable origination fee (1%) to lock in. However, you pay a basis point premium depending on the number of months that you lock. For example, I am waiting until the 12-month point to lock in for Gallery as it basically saves me 50 basis points over the 18 month lock. I’m more than willing to risk that rates won’t go up 50 basis points in the next month.

Also, I recall that Gallery’s POS binder has a condition that the project (i.e. closing) can be delayed by up to 120 days before the developer would either pay for a rate extension or let a buyer back out. So you will want to make sure you lock to that date in November rather than the estimated completion in July. Ask your buyer’s agent :)
Mike says:

September 18, 2007 at 10:46 pm

I’m guessing that last comment was from Jeff Bell, a Homestone Site Lender for Gallery.

Countrywide also offers up to 18-month locks with the previously mentioned float down option. You basically pay the non-refundable origination fee (1%) to lock in. However, you pay a basis point premium depending on the number of months that you lock. For example, I am waiting until the 12-month point to lock in for Gallery as it basically saves me 50 basis points over the 18 month lock. I’m more than willing to risk that rates won’t go up 50 basis points in the next month.

Also, I recall that Gallery’s POS binder has a condition that the project (i.e. closing) can be delayed by up to 120 days before the developer would either pay for a rate extension or let a buyer back out. So you will want to make sure you lock to that date in November rather than the estimated completion in July. Ask your buyer’s agent :)
Gigi says:

October 29, 2007 at 11:59 am

October 29,2007
hi we put a refundable deposit( as long as escrow closes with TFC Mortgage (powered by Countrywide) to locked-in using their “Builder Rate Cap Program” with 1 float down option.
Is it still refundable if just in case we won’t get approve?
thank you.
Gigi says:

October 29, 2007 at 3:59 am

October 29,2007
hi we put a refundable deposit( as long as escrow closes with TFC Mortgage (powered by Countrywide) to locked-in using their “Builder Rate Cap Program” with 1 float down option.
Is it still refundable if just in case we won’t get approve?
thank you.

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