Expert: Karyn Foley - 7/8/2010

Question
Hi,

I am looking for a house in Maryland. Have not sent in an application for pre-approvement yet.  Since interest rates are so low (and dropped again just today) how long once I get approved for an amount and interest rate is that good for to buy the house (typically)?
Thanks

Answer
Dear RL:  Good for you, pre-approval is going to be your best best for success and for prevailing over other bidders.  I would suggest calling the mortgage person who will be writing your pre-approval, and ask the questions you asked me.  It is a good idea to get the letter as soon as possible, because it can easily be updated in the future.  With reference to the interest rate, you might ask the mortgage person to pre-approve you for an interest rate up to a half point beyond today's rate, this way, if the rates go up, you will still get approved.  When you put an offer on a home, if the listing agent is smart, she would also increase the interest rate one quarter to one half above what the going rate is, making sure your offer is still valid if rates go up during the person between acceptance of offer and closing of transaction.  Also, find out what it would cost once you buy a home and apply for a loan, to have the interest rate fixed in place until closing.  Or, sometimes you can also extend the validity of the rate beyond the expected escrow period "just in case".  That option would probably only be necessary if rates are volatile and expected to go up quickly.  That is one reason some people like a thirty day period for closing, rather than 45, 60, or even 90 days which could be the buyer is an uncomfortable period of uncertain interest rates.  Keep in mind that lenders keep all their work on computers, so it is just a click of a mouse to make changes to your pre-approval letter, it is no big deal.  You are not committed to use the lender who gives you the letter when you buy the house.  But, loyalty is always respected.  So, why not check out different lenders now and see with whom you most comfortable, who appears to be trustworthy, and offers different loan programs and the best service.  Most interest rates quoted will be the same across the board, but could vary from one loan program to another.  Good luck and please let me know if you have any other questions, KARYN FOLEY