
When I was 12 years old, I would follow kids in my neighborhood dragging big pieces of cardboard around the city to dance on. They were break dancing on the sidewalks and the cardboard was stopping their heads and backs from being torn up on the hard concrete. But my favorite was the Pop & Lock. I still remember Turbo’s broom dance in the movie Breakin’ in 1984.
I don’t see much Pop & Lock today, but I’m starting to see some Lock & Shop. Lock & shop is not a dance, but a way to lock in lower interest rates before you sign a contract. Let’s say you are shopping for a home and got a pre-approval at 3% in March, (as many did). You don’t find the dream home until August and are in contract in September. The rates are now 6%, and the FED is threatening to go to 6.75% shortly. The loan on a $500k home now costs $1,135 more per month! Arggghh!!
What’s a buyer to do? Give up and moon walk away? (ask your parents) NO! You ask your lender if they have a Lock and Shop program, which allows you to lock the lower rate now and buy the property later. Genius! Many banks have this.
Wells Fargo allows you to lock the rate without a fully executed contract of sale, if you have done the inspection and have a property with a closing date. Envoy Mortgage allows you to lock the rate for up to 90 days without a property address. You need to locate the property within 45 days and enter into contract and then close in 45 days. The purchase price of the property needs to fall within 15% of the original purchase price which the lock is based on. Hudson United Mortgage lets you lock without a property with a .50% Pt cost upfront fee required (based on estimated loan amount). You can lock for up to 180 days for the .50pt fee. A 1% point fee is required up front for longer lock periods. This lock fee is not refundable, and the program is limited to conventional mortgage financing (Fannie and Freddie). In this scenario the pricing (aka terms including the interest rate) is higher the longer the lock term. This is a necessity due to hedging costs imposed by investors.
Your bank may have a program like this too. Ask your lender. Rates are going up. If you are “bout that ownership life” (Rick Ross voice), then lock and shop to save yourself thousands of dollars over the life of your loan. Afterwards, you can pop and lock to the bank. If you need help…AskHollingsworth.
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