Tuesday, May 16, 2006

Hectic homebuying


My attorney has received a letter saying that the seller would like to close before the beginning of July. This means I have some scary decisions to make. I want to lock in my mortgage rate, as the rates are already a lot higher than when I signed my contract almost 6 months ago. But since new condos are notorious for having their closing dates postponed due to construction delays, I don't want to lock in too early and then have a hassle trying to extend it if the closing doesn't happen when it should.
I am looking at a couple of different scenarios-- one has a longer lock period but a slightly higher rate. It's also better in terms of the breakeven period for the points I'd be paying. I think I may go for that option rather than risk the lock expiring on the other rate and being stuck later.
I still think it will be worthwhile for me to pay a point or two-- given historical interest rates, I just doubt it will drop enough anytime in the near future for me to refinance to a lower rate, so I'd rather pay to buy the rate down now.
I may actually lock this thing in tomorrow! I am so tense right now, and I suppose I will be nervous til the day I close that something will go drastically wrong, like that the construction will be delayed, or that my current apartment will collapse into a sinkhole or something...

On the other hand, while trying to figure out the current market value of the condo I'm buying, I was amused to see that Zillow was estimating the value of some similar units in the area at WAY more than I'm paying, like almost double! I think this is complete crap, though. I suspect Zillow is still a little confused as to the difference between a house and a condo in New York... either that or no one told them the bubble is bursting.

5 comments:

mapgirl said...

Don't trust Zillow at all. See if you can look up county records for recent sales. Those are much more revealing and accurate.

I don't know what to tell you about locking in. After reading SingleMa's traumas with new construction, I'm not sure I'd want to go that route.

Anonymous said...

you should lock it in ...rates are only going higher...

Single Ma said...

I'm a day late and a dollar short (lol) but I still have to ask...did you lock yet? If not, what is the delivery date in your contract? Is there a clause that makes the seller exempt from damages if the date slips? If you are within xx days (some lenders offer 30, 45, and 60) of your contract delivery date and the seller isn't exempt, then I'd lock it.

I had a 45 day lock and my rate lock expired, but the seller paid the points to re-lock due to their delays. It was either that or a refund of my earnest money and a null/void contract. I wasn't really going to walk but it was good leverage.

Read the fine print to see if you have any flexibility.

frugal said...

No, I don't think you should lock it. Look at the charts of ^TYX and ^TNX. They tell you directly how the mortgage rates will move. I believe that the next Fed meeting they will stand pat so that the yield curve is not inverted (which will indicate a recession). Yes, the rates will eventually go a lot higher, but near term in the next 2 months, I believe it may just stay where it is. Definitely don't pay anything to lock it. Use free lock, so that it won't hurt you.

frugal said...

If you're interested, I also have a spreadsheet for calculating Loan Point. My experience has been that it may take more than 3 or 4 years before your points to be financially worthwhile.
Here are links to the ^TYX & ^TNX charts, in case you're interested:
http://finance.yahoo.com/q/bc?t=6m&l=on&z=m&q=l&p=&a=&c=&s=%5Etyx

http://finance.yahoo.com/q/bc?t=6m&l=on&z=m&q=l&p=&a=&c=&s=%5ETNX