Builder Locking Rate or Hard Lock Rate?

[manystyles]

Hello,

 

We are pre-approved(380k) for a new construction under the VA program. It was a long day because we had to get pre-approved and pick out options, etc for the house.

 

The in-house mortgage officer(Bank of America) told us about two options.

 

The first was the builder lock rate with float down option:

 

1. 1% up front cost. based on the house price. Ours would be 3.8k or so.

2. .5% is paid back by thu builder and the other .5% is paid back by BOA. Which he said we would get back at closing.

3. If the rate changes by the time construction is done, we have a float down option 60 days before closing that would bring us to what the current lower rate is OR if the market goes up, we are protected because our rate is kept the same.

4. If selected this type of program has less points. Ex. 0.875points + 1 point added for builders option = 1.875.

5. The rate is for four months plus two months extension, if needed.

 

Hard lock rate:

 

1. Just locks our rate for 6 months

2. If the market goes up after our 6 months, so does our rate.

3. their estimating to be done in 5 months.

4. No money up front

 

I'm a little confused on the builders program. Is it even necessary to do that or could we just lock in the 5.25% with 2.5 points?

 

Sorry, if I'm not too clear on the info. It is a little confusing.

 

Thanks for your time.

[Brian B The Loan Professor]

Locking that far in advance is expensive

it would be even more if rates went up and you didnt However.....

This is a personal decision because we have no idea where the rates will go

Right now rates are great in 6 months they will probably still be good and if not that 2.5 points could probably buy you down

I am not much of a risk taker but personally (and this is just my opinion) I would probably not lock anything at this time

Floating is free - I would monitor rates and if they looked like they were headed in the wrong direction considering locking at that time

If they stay down you save a LOT of money and if they have gone up when it is time to buy 2.5 points will buy the rate down nice.

The thing that the bank is really trying to do is get you and your business locked in now

If they get that much up front they know you will not shop them. Not that you wont end up using them in the end however they want to make sure you do.

 

 

Good Luck with whatever you decide

B

[manystyles]

Brian B The Loan Professor,

 

So, don't lock anything at the momment and keep my eyes on what the rates are doing?

Is there a good site to monitor rates?

 

"and if not that 2.5 points could probably buy you down"

 

Could you explain this a little further?

 

Thanks

[Brian B The Loan Professor]

Brian B The Loan Professor,

 

So, don't lock anything at the momment and keep my eyes on what the rates are doing?

Is there a good site to monitor rates? I do not know of any that I can list here as they are all direct solicitations from lenders/brokers. You should be able to google and find something. I would rely on the person you are working with

 

"and if not that 2.5 points could probably buy you down"

 

Could you explain this a little further? Think Golf - Par rate is like a par shot you gain nothing you give away nothing. It costs nothing you get nothing. To go below the par rate (like a birdie) you have to pay this is where the 2.5% could help you to BUY a lower starting rate. For above par the bank is paying the broker. It costs you nothing but in the end you pay for it over the life of the loan

 

Thanks

[manystyles]

Here is the information about the Loaner Builder Rate:

 

Closing Cost Worksheet

 

Closing Cost Worksheet

 

1st Lien Base Loan Amt: $380,000.00 Term: 30.00

Loan Amt with MI/MIP/VAFF: $388,170.00

Interest Rate/APR: 5.500 %/5.658%

2nd Lien Line/Loan Amt: $0.00 Term: 0.00

Interest Rate/APR: 0.000 %/0.000%

1st Lien Loan Program: Govt Fixed 30

2nd Lien Loan Program:

Prepared: 11/07/2009

Proposal: Proposal 1

Property Address:

Purchase Price: $380,000.00

LTV/CLTV: 102.15%/102.15%

________________________________________________________________________________

_________________________________

ITEMS PAYABLE IN CONNECTION WITH LOAN

FIRST LIEN SECOND LIEN

$ 7,278.18 ------------- Discount Points 1.875/ %

$ 300.00 ------------- Appraisal Fee - Paid to Third Party

$ 35.00 ------------- Credit Report Fee - Paid to Third Party

$ 495.00 S ------------- Lender Fee

$ 26.00 ------------- Flood Check Fee - Paid to Affiliate

________________________________________________________________________________

_________________________________

ITEMS REQUIRED BY LENDER TO BE PAID IN ADVANCE

$ 877.35 ------------- Prepaid Interest First Lien 15 Days Interest @ $ 58.49

Second Lien 0 Days Interest @ $ 0.00

$ 720.00 ------------- Hazard Insurance - 1st Year - Paid to Third Party

________________________________________________________________________________

_________________________________

RESERVES DEPOSITED WITH LENDER

$ 240.00 Hazard Ins Upfront Impound 4 Months @ $ 60.00 Month

$ 300.00 City Taxes 10 Months @ $ 30.00 Month

$ 1,450.00 County Taxes 10 Months @ $ 145.00 Month

________________________________________________________________________________

_________________________________

TITLE CHARGES

$ 150.00 ------------- Abstract/Title - Paid to Third Party

$ 25.00 ------------- Title Binder - Paid to Third Party

$ 400.00 ------------- Attorney Fee - Paid to Third Party

$ 1,217.00 ------------- Title Insurance - Paid to Third Party

$ 40.00 ------------- Courier/Express Mail-Clsng - Paid to Third Party

________________________________________________________________________________

_________________________________

GOVERNMENT RECORDING & TRANSFER CHARGES

$ 250.00 ------------- Recording - Paid to Third Party

$ 5,700.00 ------------- City Or County Tax Stamp - Paid to Third Party

Continued on page 2

________________________________________________________________________________

_________________________________

TOTAL ESTIMATED FUNDS NEEDED TO CLOSE: TOTAL ESTIMATED MONTHLY PAYMENT:

------------- Down payment $ 2,203.99 First Lien P&I

------------- Debts to Be Paid Off ------------- Second Lien P&I

$ 15,916.18 Estimated Closing Costs $ 175.00 Taxes

$ 11,757.35 Estimated Prepaid Items/Reserves $ 60.00 Hazard Insurance

$ (10,495.00) Seller Credit ------------- Mortgage Insurance

------------- Lender Credit ------------- HOA Dues

$ (8,170.00) Financed PMI/FHA/VA Funding Fee ------------- Other

$ (2,500.00) Earnest Money

_____________ _____________

$ 6,508.53 Total Funds From/ (To) Borrower $ 2,438.99 Total Monthly Payment

============= =============

 

 

This is the info about the Hard Lock Rate:

 

 

Closing Cost Worksheet

 

 

1st Lien Base Loan Amt: $380,000.00 Term: 30.00

Loan Amt with MI/MIP/VAFF: $388,170.00

Interest Rate/APR: 5.250 %/5.463%

2nd Lien Line/Loan Amt: $0.00 Term: 0.00

Interest Rate/APR: 0.000 %/0.000%

1st Lien Loan Program: Govt Fixed 30

2nd Lien Loan Program:

Prepared: 11/07/2009

Proposal: Proposal 1

Purchase Price: $380,000.00

LTV/CLTV: 102.15%/102.15%

________________________________________________________________________________

_________________________________

ITEMS PAYABLE IN CONNECTION WITH LOAN

FIRST LIEN SECOND LIEN

$ 9,704.25 ------------- Discount Points 2.500/ %

$ 300.00 ------------- Appraisal Fee - Paid to Third Party

$ 35.00 ------------- Credit Report Fee - Paid to Third Party

$ 495.00 S ------------- Lender Fee

$ 26.00 ------------- Flood Check Fee - Paid to Affiliate

________________________________________________________________________________

_________________________________

ITEMS REQUIRED BY LENDER TO BE PAID IN ADVANCE

$ 837.45 ------------- Prepaid Interest First Lien 15 Days Interest @ $ 55.83

Second Lien 0 Days Interest @ $ 0.00

$ 720.00 ------------- Hazard Insurance - 1st Year - Paid to Third Party

________________________________________________________________________________

_________________________________

RESERVES DEPOSITED WITH LENDER

$ 240.00 Hazard Ins Upfront Impound 4 Months @ $ 60.00 Month

$ 300.00 City Taxes 10 Months @ $ 30.00 Month

$ 1,450.00 County Taxes 10 Months @ $ 145.00 Month

________________________________________________________________________________

_________________________________

TITLE CHARGES

$ 150.00 ------------- Abstract/Title - Paid to Third Party

$ 25.00 ------------- Title Binder - Paid to Third Party

$ 400.00 ------------- Attorney Fee - Paid to Third Party

$ 1,217.00 ------------- Title Insurance - Paid to Third Party

$ 40.00 ------------- Courier/Express Mail-Clsng - Paid to Third Party

________________________________________________________________________________

_________________________________

GOVERNMENT RECORDING & TRANSFER CHARGES

$ 250.00 ------------- Recording - Paid to Third Party

$ 5,700.00 ------------- City Or County Tax Stamp - Paid to Third Party

Continued on page 2

________________________________________________________________________________

_________________________________

TOTAL ESTIMATED FUNDS NEEDED TO CLOSE: TOTAL ESTIMATED MONTHLY PAYMENT:

------------- Down payment $ 2,143.49 First Lien P&I

------------- Debts to Be Paid Off ------------- Second Lien P&I

$ 18,342.25 Estimated Closing Costs $ 175.00 Taxes

$ 11,717.45 Estimated Prepaid Items/Reserves $ 60.00 Hazard Insurance

$ (10,495.00) Seller Credit ------------- Mortgage Insurance

------------- Lender Credit ------------- HOA Dues

$ (8,170.00) Financed PMI/FHA/VA Funding Fee ------------- Other

$ (2,500.00) Earnest Money

_____________ _____________

$ 8,894.70 Total Funds From/ (To) Borrower $ 2,378.49 Total Monthly Payment

 

 

Thanks

[manystyles]

Are the above closing costs typical for VA Loan?

 

I know some junk fees don't have to be paid.

 

Thanks

[Bloody but Unbowed]

styles what did you do, im kinda considering the same deal for building

[manystyles]

Bloody but Unbowed,

 

We had looked at houses and builders for about 6 months. We liked this one. Used their mortgage company(BOA).Used a real estate agent who was recommended by a good friend. She knew her stuff, to say the least.

 

She got us:

 

1. Free basement area walkout

2. Free sunroom

3. A clause that states if the builder isn't done by the 8k tax credit ending, then the builder has to come out of pocket.

 

The builder:

 

1. 20k off the price

2. 20k in upgrades

3. Paying all closing costs per VA

 

Some other things, but I can't remember.

[Bloody but Unbowed]

So did you do the builder lock rate and/or include a clause stating that if they werent done they would pick up the float mos points?

 

Thanks ... I think I know the builder your working with ... Is it Beazer?

[manystyles]

Bloody but Unbowed,

 

Yes, it's Beazer.

 

We didn't do the builder lock rate. We decided to do a Hard lock for 6 months at 5.35% with 1.25 points.

 

The Builder Lock rate would require us to kick out about 3.5k in the beginning. They didn't have that clause that you mentioned. They did have an extension you could purchase, of course.