When a bank locks your rate, they’re guessing where the market will be when the lock expires.
- If the market goes to crap, they promised you a great rate and have to deal with the change when they sell your loan.
- If the market gets better, they can make more money than originally planned when they sell your loan.
You have risk, they have risk. How long are you asking the bank to stick their necks out?
The longer you want the rate locked for, the more the market can go to crap. We all know how things roll downhill, right?
Banks protect themselves by assuming the market will deteriorate more over time. They guess costs (points) will be higher 60 days from now compared to 30 days from now.
They pass those higher costs onto you. That’s why the costs on a 60 day lock are higher than a 30 day lock.
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Information accurate as of publication date; the views, articles, postings and other information listed in this section are personal and do not necessarily represent the opinion or the position of American Pacific Mortgage Corporation. The material in this section is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is without errors.Tue, 2016-02-02 07:40