Lock and Shop & Float Down Lock Discussion

We all knew that a rise in interest rate would hit at some point in time. That time now appears to be upon us as we have seen the 10 Year Yield rise to levels not seen since 2013. Many believe that the yield could rise to as high as 5% from the 3% level where we currently sit or if some calamity occurs back down to 2% Whichever way one looks at it, things will change.

For the potential home buyer that can be disastrous especially when home prices are rising as well. the 30 Year conventional rate has already risen from 3.75% to 4.75% and the 10 Year treasury yield from 2.34% to 3.05%. The rise has taken place over less than a 6 Month period.

An example of a 1% change in rate is shown below resulting in an increase in monthly payment 0f $187 (12.6%) on a $320,000 loan.

320K loan amount payment at 3.75% $1,482
320K loan amount payment at 4.75% $1,669

With limited housing stock and new homes that will not be completed for 4 to 12 months, that can present a real problem for home buyers trying to qualify. To solve this problem MCM offers two programs available to clients. Lenders can offer their home buyers long term rate protection with a lock and shop option or the rate protection plan (RPP). Below are the highlights of each of the programs.

Lock and Shop

The Lock and Shop program is designed for the buyer that is ready to buy but has not found a property yet.

  • The Rate and Price will be capped .125% above market for up to 90 days