As the world economies all continue to soften and rates continue to fall, many borrowers are reluctant to lock hoping for a lower rate tomorrow or next week, or next month.
There are several things such borrowers need to consider. First, for borrowers purchasing a home, a reluctance to lock is a problem because we are unable to prepare accurate disclosures and calculate exact debt ratios right away and this can severely delay an escrow.
In addition, borrowers who try to time the bottom often get burned with unexpected rate bumps. We saw this happen in the Fall of 2010 when it seemed that everyone expected rates to fall indefinitely, and rates instead jumped up about 1/2 per cent unexpectedly. We had over 60 borrowers in our pipeline, who did not want to lock previously, who lost out on an opportunity to refinance.
And lastly, borrowers can always refinance (usually at “no cost”) if rates fall. Most lenders only require a borrower to hold a loan for 120 days. This means we can lock a borrower into a lower rate as soon as 60 to 75 days after close. And because we have all the borrower’s information on file, a refinance is usually a fairly simple and painless process.
Founder/Broker | JVM Lending
(925) 855-4491 | DRE# 01524255, NMLS# 335646