Securing a loan when you have not bought the house yet
We are preparing to move in the spring of 2013. Since we already know where we are moving, Approx. when we will be moving and the cost at which we are paying are there any options for us to take advantage of the low interest rates?
My concern is that they cannot remain as low as they are for much longer, it is an election year and the economy seems to be rebounding, albeit slowly, it still appears to be going forward.
Is there any way to secure a loan now? Or lock in a rate months prior to purchase?
Can't remember the details but I'm fairly certain that yes, you can, and you should. You don't even need to start to "borrow" until you need it. That was what we did when we purchased our property, and having a loan ready when we made the offer gave us great bargaining powers. From seller's perspective, it is far more enticing to have a buyer cash in hand, than one "pending for loan approval".
If you're planning for spring of 2013 though, I don't think you have much to worry about in terms of the interest rate increasing dramatically. From everything I've read, its going to be remaining low for awhile.
The last time I looked the Fed funds rate is going to stay close to zero through 2014 (don't quote me and I don't have time to look but I am pretty sure this is true). When I was applying for a mortgage last year, I could keep the rate and lock it in for 60 days. Some lenders only allow 30. I am in Virginia so it could differ by state. I would however not worry about the rates changing.
Unless things have changed, no fee was involved in my mortgage application and no property was used for collateral during the application phase. During the application, an estimated amount of loan was calculated, secured (meaning, we were guaranteed we would have that money when we needed it; it did not mean we would borrow that amount when time came), rate locked down, and the rest was just finding the right property to purchase. Once the offer was made and accepted, and money was actually lent out, the property itself then became the collateral for the loan, and then we start to get charged for the interests. Now I had a really good credit score, was able to put down 50% of down payment, and was extremely conservative about the amount of money we were to borrow (about half of what they would lend based on credit score) so that might have played into my favor.
You can go ahead and prepare all of the loan application/approval paperwork and then the mortage company will usually offer a 30/60 day lock on your interest rate as you get closer to your closing date. Sometimes there is a fee for a longer lock or they lock you in at a slightly higher rate than the current market rate if I remember right.
If it takes you as long to get through the paper trail as it did me, you might need all of those months between now and Spring 2013!!
"Farming looks mighty easy when your plow is a pencil, and you're a thousand miles from the corn field." --Dwight D Eisenhower