Thursday, July 14, 2011

This Week's Winning Mortgage Question

This week's winning question was submitted to us by Nancy Woodson at Metro Brokers Denver Home Real Estate, Inc. Nancy receives a $25 gift card and gets her contact information sent to the 6,600 people on our contact list. Her contact info follows:

Nancy Woodson
phone: 303-697-1767
email: ncwcpa@aol.com

Nancy's question is: If a buyer has locked in the interest rate for a short sale transaction, and the deal is taking longer than expected to close, does the buyer have to pay for a rate lock extension? Are they obligated to use the original lender, or can they switch lenders to avoid the lock extension fee? Would they incur any fees if they switched lenders?

Here's the answer: Each lender has different rules for when the interest rate lock expires. Some lenders will allow the rate to be re-locked with no penalty (provided the current rate is the same or lower than the old rate). Other lenders will force the buyer to pay for a lock extension, unless the rate lock has expired for a minimum period of time (usually 30 days).

Under NO circumstances is the buyer obligated to use the original lender. A buyer is NEVER obligated to use a lender until they have signed the last piece of paper at the closing.

If the buyer decides to change lenders, they do not have to pay the lender anything except the exact costs for third-party fees incurred by the lender (appraisal, title work, etc.). If the buyer decides to change lenders and the loan fails to close through no fault of the lender, then the buyer may have to pay up to $300 to the lender for preparation work performed.

Regarding these fees, we don't know any title company that charges for loans that don't close, and no lender with any good business sense at all will charge a buyer $300 if a loan doesn't close. Appraisers expect (rightfully so) to be paid for the work they perform. It is always wise to ask the new lender if they will accept the old appraisal, saving the buyer the cost of two appraisals.

The bottom line is that a lender should do everything possible to explain to a buyer why locking an interest rate on a short sale transaction is a horrible idea until the short sale approval is obtained from the seller's lender. We do many short sale transactions and have never had a problem with rate locks because we explain that short sales take more time than everyone would like. Locking a rate when you don't know the closing date is just silly (and very bad business).


Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

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www.mtgsupportservices.com

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