I'm building a home with a target closing on March 15, 2013, but may close as late as April 15, 2014. I can get a 9 month commitment letter for 3/4 rate point. Is that my best option?
Clarification: Financing $200000 on a $286777 home (new const). Cost of 9 month commitment is 1% nonrefundable upfront fee plus a 3/4% higher rate (compared to online options). The lender's commitment is to lock the rate (at my timing) anytime between today and closing (max of 9 months). There is a float down option that would cost another 1% if the float down option is elected.
Hard to answer without a little more info. When you say 3/4%, are you talking about the cost of the lock (ie: $750 on a $100,000 loan), OR do you mean 3/4% to the actual rate?? Former would be a good deal, later not so much. Are you locked in to this particular lender due to builder incentives or other commitment? If so, you have less options and a longer term lock may make more sense. Do you have to pay the 3/4% upfront (in order to do the 180 day lock? (as is usually the case), or is the cost just applied at closing? "Best Execution" rates right now are near 4.25%, meaning an ideal borrower could get 4.25% with no points. If you could guarantee 4.25%, with 3/4% origination fee, you could certainly do far worse. If their current rate is significantly above 4.25% (barring credit or other loan pricing adjustments), might be prudent to look at all your options prior to committing at this early stage. Lots of thoughts, I know, hope they help. Ted