(SHORT SALES – Locking In Interest Rate) A previous Tucker’s Tip #4-2011 discussed what constitutes a qualified short sale Buyer. First, the Buyer needs patience to allow sufficient time for the short sale lender to approve the contract. Second, the Buyer may need to provide additional cash to contribute to any subsequent lender, investors and mortgage insurance requirements for short sale approval.
As a result of the time usually required for short sale approval, the Buyer should consider delaying as long as possible locking in the interest rate with their lender. There is unfortunately no guarantee how long a short sale may take for lender approval. A possible strategy described in Tucker’s Tip #9-2011 suggested first satisfying the inspection contingency, and then once satisfied, the Buyer can apply for the loan. Both of these contingencies should be completed after “contract ratification”, not after “lien holder approval”. By using this plan, the loan application is not submitted until approximately thirty days after contract ratification, thereby allowing a longer opportunity to lock in the interest rate.
As there is no guarantee how long a short sale approval will take, delaying locking in the buyer’s interest rate will usually save the Buyer from paying potential “lock extension fees”. Obviously, there are certain instances when the Buyer may decide that “locking in” early is their best strategy. In these cases, if possible, try to negotiate as long a loan lock period as possible.
PS – The City of Charlottesville Clerk’s Office will be CLOSED April 13th for Thomas Jefferson’s Birthday.