Lender just upped my rate!!!

BAVEMay 12, 2012

Hello everyone. I'm interested in your thoughts, advice, etc. We are in the process of beginning to build our home (Texas) and days before closing on a single close construction loan, the bank (BBVA Compass) changed the rate from 4.39% on a conforming 29 year loan to 4.85%. I had previously told the bank that I would not accept the rate of 4.85 and was soon after approved on a 4.39 rate (cost me a point in prepaid interest).

Is this common practice? Also, what are your thoughts on this type of loan and rate? Thanks!

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It doesn't surprise me that banks pull that ^^&(^&**%%. What do you have in writing?

    Bookmark   May 12, 2012 at 7:11PM
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That stinks! We paid some small fee to lock in our rate for 30 days while we sorted out all the paperwork and appraisal stuff. When we were shopping for construction loans, rates were not very competitive since so few banks were even offering constructions loans. :(

    Bookmark   May 12, 2012 at 8:41PM
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Is this a standard loan or a jumbo loan? We will pay less than that on a jumbo, which is why I asked. I guess you pay a premium in interest for the single closing and locking in the rate in advance? We rolled the dice and our rate has gone down (been building 14 months (!) but almost done).

    Bookmark   May 12, 2012 at 9:15PM
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The mortgage banking officer emailed me and told me I was approved at the quoted rate on the application documents(which is 4.39%). That was a week ago. Today the lender emailed me a modification of the loan documents stating a new higher rate of 4.85%. We are supposed to close on the loan this week but I am now very hesitant.

    Bookmark   May 12, 2012 at 9:21PM
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The loan is $417,000 conforming (non jumbo) and the appraisal came in at $605,000 with the land (we own property). The premium is the single close and "peace of mind" of a rate lock. However, locking in at nearly 5% right now is obviously questionable. Then again my credit is in the mid 600's so not great by any means.

By the way, the lender is also charging $14,000 for origination fee and points to get this wonderful rate.

    Bookmark   May 12, 2012 at 9:36PM
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I'm thinking your credit score is your dinger.

    Bookmark   May 12, 2012 at 10:40PM
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"I'm thinking your credit score is your dinger."

I'm 99% sure thats the problem. However, our income is approximately $300k ($400k for 2011) and the loan to value ratio is pretty good so I thought 4.39% was fair considering a conforming 30 year (non jumbo, non construction) is below 4%.

    Bookmark   May 12, 2012 at 10:52PM
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Was the point also part of a rate lock deal, or just a reduction point?

It might be time to read everything VERY carefully, and talk with your attorney.

Lenders will use just about every out they can when rates or perceived risk changes.

    Bookmark   May 13, 2012 at 9:38AM
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"Was the point also part of a rate lock deal, or just a reduction point? "

Yes. The total 3% fee includes origination, rate lock, and reduction. Apparently single close loans are very tough to find locally in todays market. We're thinking there may be no other choice but accept a less than great rate. Unfortunately the closing costs make it questionable to consider refinancing (if rates remain low) 10-12 months from now when the house is completed.

    Bookmark   May 13, 2012 at 9:46AM
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I am surprised they dinged you that much on the rate.
Usually FICO, LTV related dings are applied to the points which shows up in your settlement/closing costs.

I would ask the lender to spell out his execution itemization for that rate.

Seriously, they can't charge you a higher rate than promised without an explanation.

Points dings are one thing but rate changes are absurd.

    Bookmark   May 14, 2012 at 12:36PM
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What happened? Did you use BBVA? Was it a single close to fixed rate 30yr mortgage? Can you please message me the details of the loan?
Should I not even bother contact BBVA?

    Bookmark   August 19, 2012 at 7:02PM
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I am currently searching for a construction loan that rolls into a 30 year fixed rate and having very little luck in my area.

That said, given those rates and fees I would not be getting that loan. US Bank offers a construction loan that coverts to an ARM starting at 3.5% and there fees are low ($1200 origination fee, and a $3000ish fund management fee). Given the rates and fees you are facing it may be worth while to look into other options.

    Bookmark   August 19, 2012 at 10:36PM
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