When to lock rate for Perm Financing?

txaggieinargyleAugust 1, 2012

When did you lock your rate to convert from a construction loan to permanent Financing?

I have an option to lock in at 3.5% (30 yr fixed) for a 75 day lock. I am probably 45 days from completion on the house.

I am staying with the same lender that did the construction loan so I took advantage of their "one Time close option" on the original loan. My only closing costs on this loan will be about $400 conversion fee. No points no origination.

Will rates get better? How much? I know they are at an all time low right now.

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pbx2_gw

They aren't going to get much better than 3.5%.
Too dangerous to float that long out - 45-75days.

I would just lock & call it a day.
My conversion is $750 so you are getting a good deal @ $400

    Bookmark   August 1, 2012 at 4:27PM
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pbx2_gw

Sorry meant to say that too dangerous to float as you get below 45 days & definitely 30 days.

Great rate btw- you are basically getting the best execution rate!

    Bookmark   August 1, 2012 at 4:32PM
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brickeyee

Crystal balls have never been know to be very reliable.

    Bookmark   August 1, 2012 at 4:40PM
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txaggieinargyle

I locked in, don't know what i was thinking.

    Bookmark   August 1, 2012 at 7:06PM
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pbx2_gw

You did fine.
Relax & enjoy the new house to come!

    Bookmark   August 1, 2012 at 10:32PM
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auroraborelis

Fantastic rate! I'm jealous!

Can I ask what bank you used?

    Bookmark   August 2, 2012 at 6:32PM
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Xclusive

I would say locking it wasn't a bad move but at the same time who really knows. People say that rates can't get much lower but the same people were saying the samething when rates were in the 5's, the 4.5's, 4.0's, 3.5's and so on. Rates have been down to 0 in Japan, a little different dynamic but thats another convo for another forum. We could have gotten 3.5% but locked in at 3.75% with builder paying closing cost so we are ok with that. I guess its a gamble you have to feel comfortable with. We were happy when we folded so I guess thats all that matters (unless I see rates get in the 2's) :)

    Bookmark   August 2, 2012 at 7:47PM
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kirkhall

I think I heard somewhere that cost to the bank is about 3.25% So, I think if we see in the 2's, for a 30 yr fixed rate, the world will be about to end (or at least banking).

    Bookmark   August 2, 2012 at 7:55PM
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pbx2_gw

Agreed kirkball, we'd have bigger problems if rates get into the 2's.
When no1 is making or spending money...eeek!

    Bookmark   August 2, 2012 at 11:07PM
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txaggieinargyle

We used a local bank

Town square mortgage in southlake, tx

    Bookmark   August 3, 2012 at 1:27AM
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auroraborelis

Ah, I'm jealous of everyone on GW who has small local banks willing to do construction loans, especially ones that convert to a 30 year mortgage!

    Bookmark   August 3, 2012 at 1:27PM
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dekeoboe

Laura - you could move to somewhere with a small local bank LOL

    Bookmark   August 3, 2012 at 8:54PM
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auroraborelis

:) Hmm... Let me think about it!! ha

    Bookmark   August 3, 2012 at 11:04PM
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david_cary

From my understanding the spread from the 10 year T bill is very high right now so there is actually some downside potential.

Of course the T bill has risen a lot recently from all time low of 1.38 to 1.56. Germany has been as low as 1.1% this month and Japan last I saw was .75.

But the T-bill and rates question is a little bit of slight of hand anyway. Banks sell the vast majority of mortgages to a quasi government agency anyway. They can make money on the fees and be happy. The rate that Fannie Mae pays can be as close to zero as the government wants so they can make money on 1% loans in this environment. For a while....

Certainly the rates can be 2.5%. When Greece leaves the Euro, I would bet we will see rates hit new lows. The upside potential on rates is very low.

Now an election result could change anything.

    Bookmark   August 4, 2012 at 6:02AM
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gaonmymind

Laura12 - I used a national bank.

    Bookmark   August 4, 2012 at 7:38AM
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auroraborelis

gaoonmymind - what bank did you use?

    Bookmark   August 4, 2012 at 1:18PM
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