Locking Your Interest Rate when Buying a Tucson Home
December 28, 2009
Getting a home loan can be a big deal. There’s a lot of news out there about interest rates being low – I remember my first interest rate on my home loan was 8% and that was a FABULOUS deal back in 2000. Generally, rates are even lower now; my past few clients have ended up with home loan interest rates between 4.5% and 6% (depending on the loan program they selected and their credit scores).
There comes a point when you buy a home in Tucson that you’ll decide to lock your interest rate. When you’re out shopping for a house, you get pre-approved for a loan and they’ll quote you rates as of that day – but rates can change daily, if not several times a day sometimes. So you don’t know exactly what interest rate you’re going to get until you lock it. And generally, you can’t lock it until you have a home under contract. You have to have an accepted contract on a house to lock that rate.
Contractually, if you used the typical purchase contract and loan approval form in Arizona, you’ve made a couple of declarations and commitments about your interest rate in the contract to purchase your home. For example, you’ll declare a maximum rate that you’re willing to pay for your home loan. If rates go above that maximum, then you’re not obligated to buy the home.
BUT – the pre-approval form we use in Arizona, called the LSR or Loan Status Report, says that you’re going to lock your interest rate in your inspection period. Or else you lose the ability to walk away from the home if rates exceed your stated maximum.
So timelines matter. You need to lock your rate within your inspection period or else you lose that contingency. Which gives you, typically, 10 shopping days to lock that rate. It’s not a huge window of time, but home loan interest rates can fluctuate often. And interest rate locks also often come with an expiration date – most rate locks are good for 30-45 days. Look at your timelines carefully. You want your rate lock to last until you close on the house. If you’ve got a short inspection period and a long contract interval, you need to make that locking decision carefully.
How Mistakes Affect Your Credit Score
December 8, 2009
Interesting article about credit scores from my lender friend Justin McHood in Phoenix.
FICO (the people who created the industry standard in credit scoring) released information on how much your credit score may go down when something bad happens – something like maxing out a credit card, having a late payment, or having a foreclosure on your record.
You’ll notice that the higher your score, the more you get penalized. For all but one of the credit mistakes listed, the minimum smack-down for people with high credit scores is more than the potential maximum for those with lower credit scores.
FICO says that’s because a lower credit score already reflects riskier past behavior. One more risky behavior is not quite as significant to those with lower scores than to those with high credit scores.
But if that is true, then having a high credit score means you have a history of non-risky behavior. So shouldn’t having one of these credit mistakes happen be considered an exceptional event?
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