Thursday, August 2, 2012

NVR Rate Lock-in Options


It seems like NVR has not been clear with some people on their options for locking in their rate.  I'm not surprised, because they didn't tell us about it until we pushed them for an option to lock in early if we wanted (and even then they "strongly suggested" that we wait until a month before our settlement date to lock in... but I like to make my own decisions, so I didn't listen to them :)).  Even after they explained the process for locking in early, I was still confused.  It wasn't until I actually started asking our Loan Officer for rates that I understood how it works, so I figured I'd write a post to try to clear things up for those of you who haven't locked yet.
 
You can lock as much as 150 days out, there's just a difference in the rates and/or points you have to pay to get those rates, but they give you options.  When asking for your rates, just ask your loan officer for 60 and 90 day lock rates to see the difference.  I emailed my Loan Officer once every few weeks to get rate quotes in the beginning.  Then when rates really started to drop, I emailed her every day.  We decided early on that if we could get 3.75% for no points, we would lock.  (I'm the kind of person that needs to make a plan and stick to it, or I drive myself crazy trying to make a decision). 
 
Here's an example of what the difference was for us between a 90-day lock and a 60-day lock on the day we locked in.   By the way this is exactly what my LO would send me when I emailed her for the rates.  Luckily my LO was awesome and always got back to us within a few hours.
 
90 day (expires 10/24)
3.25% - 1.25% discount pts
3.375% - .375 disc pt
3.5% - lender credit of .5%
3.625% - lender credit of 1.125%
3.75% - lender credit of 1.5%
3.875% - lender credit of 2%

60 day (expires 9/24)
3.25% - .875 discount pt
3.375% - 0 disc pts and no credit
3.5% - lender credit of .875%
3.625% - lender credit of 1.5%
3.75% - lender credit of 1.875%
3.875% - lender credit of 2.375%
 
For example, if your loan amount (house price minus down-payment) was $100,000 and you chose the 3.375% 90-day lock, you would have to pay $375 (0.375 pts) at closing to receive this rate.  If you did the 3.375% 60-day lock, you would get that rate at no cost.  The lender credit just means they give you that money at closing. 
 
We would up doing the 3.625% 90-day lock so we will be getting about $3,000 credit at closing.  We chose that so we would have some extra cash available after closing.  We were between 3.625% and 3.5%, and even though we are less than 60 days from our estimated closing date, we chose to do the 90-day lock to be safe just in case something happened that pushed back our settlement date (there's my worrying coming into play again).  The difference between those two rates over the life of our loan was about $7,500 (difference of $20 in our monthly payment).  So basically we are "financing" that $4,500 ($7,500-$3,000=$4,500) in order to have that $3,000 lender credit right now.  Our thinking is that we need the money more now that we will in 7 years, which is the break even point between those two rate options.  Normally I am against unnecessary financing of any kind, but this just seemed to make sense for us.  (Hopefully this post is making sense too... the more I write the more confusing it sounds!).  

Keep in mind that if you don't go to settlement before your lock expiration date, you automatically get the higher of either the rate on the day of your settlement or the rate at which you originally locked.
 
I hope this helped some of you who are still in the early stages!  Happy rate-watching!

12 comments:

  1. Good post! Didn't know there were two ways to lock.

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  2. Great post...we choose 3.25% at 60 days with .375 discount

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  3. Great info, we are just now rate watching!

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  4. Very informative! Question: Your $3000 back at closing...if that's more than you owe in closing costs, do you get that in cash? We're financing our closing costs, so I'm a little unsure how it would play out if we get a lender credit on our rate lock. I'm sure our LO could tell us, but it's always nice to hear from someone who isn't biased. ;)

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    1. Good question... that I don't know the answer to :). Unfortunately our closing costs are WAYYYY over $3,000 so we'll be using up every penny at closing. I'm thinking they would just subtract it from the amount you will be financing, but who knows.

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    2. Ah well, it was worth a try! :) Our closing costs are pretty high too but apparently we can finance most of it. Which is good, because otherwise we'd be stuck!

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  5. Thank you for the post it was very informative

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  6. Nope, still confused about this CREDIT thingy??

    My LO keeps referring to that and I just dont get it.....

    So its a.maybe it will happen maybe it wont kinda thing??

    We are at 3.625 % already with 1 point....we wont close till Dec. 28th and I image rates just keep climbing....

    Our closing costs are already.....out of this world,,...and over mortgage is over budget so paying to lock in is just not an option for us...

    but I just dont understand this credit part??

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    Replies
    1. Basically, they will give you money (credit)toward closing costs if you opt for a higher rate. They give you several choices on your rate, so you can either choose to pay for a lower rate (which it sounds like is not an option for you) or take a higher rate and receive money off of your closing costs. In that case, you save money up front, but you'll wind up paying more over the life of your mortgage since you interest rate is higher. This is the route we went. The example I gave above was for one day... the options change every day based on what the market is doing. Any clearer?

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  7. 90 day (expires 10/24)
    3.25% - 1.25% discount pts
    3.375% - .375 disc pt
    3.5% - lender credit of .5%
    3.625% - lender credit of 1.125%
    3.75% - lender credit of 1.5%
    3.875% - lender credit of 2%

    60 day (expires 9/24)
    3.25% - .875 discount pt
    3.375% - 0 disc pts and no credit
    3.5% - lender credit of .875%
    3.625% - lender credit of 1.5%
    3.75% - lender credit of 1.875%
    3.875% - lender credit of 2.375%

    Colette...

    Is this an NVR thing or just a mortgage thing??

    Ok, so.......if you were looking at higher rates.....as above......ex. 3.625 the lender will give you 1.875% back at closing for taking the high rate??? So they only reason you would pick a high rate is if you needed some cash given back to you at closing.........

    So really NVR is saying ....sure.......we will give a couple thousand dollars at closing because you just picked a higher rate and over time you will pay NVR much more than those thousands they gave you at closing???

    I think I am following.......

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    Replies
    1. Exactly.

      It's my understanding that most mortgage companies offer you different rate/point options. Before NVR I had only ever heard of paying points to get a lower rate, but I never asked about the other way around (receiving points for a higher rate).

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  8. Hi,
    I had a question, we just did our pre drywall meeting yesterday and were given the option to close today by NVR. All along the loan officer told us that she will work with the 1% origination fee, but today she bluntly told me we are in this to make money, get me a competitive offer and then i can take it to the management.
    Did you guys end up paying that 1% origination fee too ? in addition to these rates above.

    thanks,
    J.

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I am so thrilled that you stopped by and I loooove comments! Leave me some love and I will respond shortly. Peace and love – Colette.