Interest Rate Lock for a Kentucky Mortgage Loan

Interest Rate Lock on a Kentucky Mortgage Loan.

What is a rate lock?

A rate lock is an agreement between you (the borrower) and us (the lender) that a specific interest
rate will be provided to you for a specific period of time (the rate lock period).

When is my rate locked?

We will confirm and lock your interest rate with your verbal or written authorization.

What if rates go up before I close my loan?

Once your rate is locked, we immediately purchase money from our investors for you at that specific
rate. As long as your loan application is approved and all the other terms and conditions or the approval
requirements are met, this money will be available to you at your loan closing regardless of
market conditions after you have locked your rate. If interest rates have increased, you are protected
and can be assured that your locked rate will be honored on your loan papers on the date of closing.
We will NOT ask you to pay a higher interest rate simply because the market has worsened.

If rates appear to be dropping, why shouldn’t I wait to lock a rate?

Ask yourself what would be more disappointing: locking a rate and finding that you may have missed
a lower rate or NOT locking your rate and finding that rates have increased? It is our objective as
advisors to assist you in determining an optimal time to lock an interest rate given our professional
assessment of market conditions as well as your objectives as our client. We may not be able to
catch the very lowest rate every time, however, trying to time the market is a risky game. Far too often
the market can and does spike sharply leaving many clients wishing they would have locked in a
rate. Keep in mind that if rates continue to fall, you can always refinance your loan, subject to our
Post-Closing Refinance Policy.

How soon can I refinance my rate after closing?

As lenders, our contractual agreement with our investors requires that the loans we originate stay on
their books for at least 120 days. If the loan is paid off within that period of time (i.e. through a refinance),
we must return the compensation we received for our services on the initial loan. While we
cannot prevent you from refinancing during the first 120 days, we can only ask you in good faith if
you would refrain from doing so.

Kentucky FHA Mortgage Rates | Buying down your mortgage rate, and “2-1 buy-down.”

Kentucky FHA Mortgage--Pay points to buy down rate : What t is the difference

Gina Pogol
October 19th, 2010

If you spend much time reading about Kentucky FHA mortgages, you come across two terms: “Buying down” your mortgage rate, and “2-1 buy-down.” They sound similar, but they are completely different concepts.
Buying down your mortgage rate
This simply means getting a lower interest rate by paying higher fees. For example, you might be able to get a 30-year mortgage with a 5% interest rate at no cost — no loan fees, no appraisal fees, no nothing. Or you might be offered 4.5% with standard fees. But what if you want 3.5%? You’d have to pay extra — that extra cost is in the form of what are called “discount points.” Each point is one percent of the loan amount, and gets you a discount on your mortgage rate. It might cost you several extra discount points to lower your mortgage rate by a full percent.
Should you pay extra to lower your mortgage interest rate?
It depends on how much it costs and how long you expect to keep the mortgage. An Kentucky FHA mortgage calculator can help with this. For example, if you take out a $300,000 mortgage with no points at 4.75% and expect to keep you home for five years, does it make sense to pay points? A point costs you $3,000, and if it lowers your mortgage rate to 4.5%, the difference in your monthly payment is $45 ($1,565 – $1,520).  In five years, you would have saved $2,700. It doesn’t make sense to pay $3,000 to save $2,700. So what if you shop around for better Kentucky FHA mortgage rates and find a better lender that will drop your rate to 4.25%  for that same $3,000? Your new monthly payment is $1,476, your monthly savings increases to $89, and your savings over five years increases to $5,340. It may then be worth buying your rate down.
The 2-1 buydown
Mortgage rate buydowns are a different story. The FHA 2-1 buydown gets you an interest rate that is lower than the going rate for the first couple of years. So if the market rate on a 30-year mortgage is 4.75%, your interest rate the first year would be 2.75%, the second year it would be 3.75%, and then it would be 4.75% from year three on out. But it’s not like the lender just gives you that sweet deal for nothing. Rate buydowns require that you pay the difference upfront.
Huh?
Yep. Here’s an example of how the cost of a buydown is calculated.
Example: Standard 30-year Kentucky FHA Loan
$100,000 loan amount
8% interest rate = $8,000 a year in interest.
With the 2/1 buy-down the transaction would be as follows:
$100,000 loan amount
1st. year = 6% Interest rate = $6,000 in interest, a savings of $2,000
2nd. year = 7% interest rate = $7,000 in interest, a savings of $1,000
So the lender would charge you $3,000 now for the privilege of saving $3,000 over the next two years.
This is slightly oversimplified because the calculations are a bit more complicated, but it’s pretty much how it works. So unless you can get your seller to pay for it, there is little advantage in the 2-1 buydown for you.
The difference between buying your rate down and a 2-1 buydown is that the 2-1 won’t ever save you more than you pay for it. Buying your rate down can potentially save you more than the cost of the points.

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Kentucky FHA Mortgage Rate buy down vs paying points: The difference----Call for a free application today at 502-905-3708 or email us at kentuckyloan@gmail.com