After locking can I get the lower rate if rates drop?

Mortgage Insider » Answers - Mortgage » After locking can I get the lower rate if rates drop?

Here’s the question…

“My wife and I are purchasing a new build and set to sign closing papers in December. The mortgage company wanted to try to get me to lock in at 6.50 and i told them that that rate was much higher than the going rates for an FHA at 6.00,two days later they called me and said the lender will lock in at 6.00 and that they never saw it this low and payments would be 1189.00 a month,before i was quoted 1475.00 a month,well this sounded better so I verbally locked over the phone.The next day i heard the rates dropped again to 5.63..Well i wonder if they knew this ahead of time and got me to lock in before the rates dropped more so they wouldn’t lose money.

My question is, can i change to a lower rate if it drops after i locked in?

I read you article on mortgage scams and one of them was they do a pre penalty thing, well thats what they told me to.This mortgage company ( Suburban Mortgage ) works for the builder. They offered us $3500 toward down payment if we went with them. If we used our own broker they would only give us 1500 down payment assistance, so we went with the builders lender( Suburban Mortgage).Do you think we are being scammed?”

This is one of the big misconceptions in the mortgage industry …the “float down”.

The float down is builder mortgage company fiction…it doesn’t exist.

Remember this….when it comes to locking in a rate….a lock is a LOCK!

This idea of “lock today…if rates drop well “relock” you at the lower rate” was perpetuated in the new home builder boom days when it was clear the direction of the Fed and mortgage rates was lower…to sucker folks into contracting on homes that might take 12 months to deliver.

The new home builders always new they had “extra profit” built into the home, so they could cover any monies “lost” on a “float down”. Now that the new construction market is horrible and the direction of mortgage rates uncertain, the “float down” is no longer part of the sales pitch.

If they do use it, rest assured you paid too much for the house and they will be covering that “expense” out of the price of the home.

Also you should read how to lock as I noticed you said “verbally locked”…there is no such thing as “verbal” binding terms in real estate.

Good Luck!