How Long Should We Wait?

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Q & A with Dottie Herman

Question: My husband and I just put an offer in on a home. The people we are purchasing from have to time buying another place at the same time. They do not want to leave their home until they close on their new condo. If we get locked in for a mortgage rate, how long can we lock in for? We are concerned that they will end up needing more time and we will have to re-apply? How does all of that work?

Answer: The typical lock in period for a mortgage is 60 days.  If you need beyond 60 days, you can ask your lender about extended lock-in terms.  There may be a cost to do this, as either a higher rate or an extended lock-in fee.  You will most likely not need to re-apply but you may need to supply updated documents to extend your commitment approval.

Question: Why do different banks offer such different mortgage rates? Is it dependent on the applicant, or do some banks have better rates than others? What about mortgage brokers? Are their rates higher since they don't work directly with a bank?

Answer: Banks base the interest rate on several factors.  Credit score, Loan to Value, Loan amount, Property type (condo, coop, 1 to 4 family).  Depending on the type of products that they want to focus on, banks will price certain products more competitively than others.  It makes sense to check with at least a couple of lenders to compare options.  Mortgage Brokers will look at the lenders that they have agreements with to see if they can offer a better rate.

Question: Does paying one late mortgage payment affect our standing with the bank in any way? Does it affect our credit score?

Answer: One late mortgage payment will usually affect your credit score.  Your credit score will generally drop as a result of a mortgage late payment. A foreclosure proceeding will generally not result from less than 3 missed mortgage payments.

Question: I recently heard of a foreclosure in my area and my husband and I are very interested in purchasing and renovating the home. How can we go about this? Who do we contact? Can we get financing for a foreclosure? Most foreclosures are listed with a real estate agent.

Answer: If the property needs work and the utilities are not working, this will require a special type of financing know as a renovation loan. Not every lender offers this type of product so you will need to ask your Realtor if they can recommend anyone.