We often have borrowers reluctant to lock in a rate b/c they want to time the market, and lock when rates “bottom out.” This almost never works and often creates major issues for several reasons.
First – it is impossible to time the market; nobody knows what the market will do, ever. We have seen the market turn on a dime hundreds of times over the years, with rates moving as much as 1/2 percent in a single day.
Second – not locking delays purchases. We cannot prepare disclosures until the rate is locked. And, we cannot submit a loan to underwriting until disclosures are signed by all borrowers. If we have short contingencies or closing periods, a delayed lock can be catastrophic.
Third – we can refinance at “no cost” later on if rates drop. If a loan amount is above $250,000, we almost always are able to offer a “no cost” refinance, or a refi for which we pay all the nonrecurring closing costs. Hence, if rates drop after a borrower locks in or closes on a purchase money loan, we can simply refinance the borrower into a lower rate in a few months at no cost.
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646