Mortgage Contingency Question

Hi. Is it customary as a buyer to add a clause in the mortgage contingency for a rate cap on the mortgage you are offered by the lender? For example, that the mortgage you are offered cannot be over 6%?

I have seen a couple of posters on here recommend doing it, and I’ve searched online about it and it seems like something that is done, but I am being told by my attorney that this is not customary.

Just curious. Thanks!

gimmeshelter

in Mortgage 14 years and 1 month ago

7

Please log in, in order to post replies!

7 replies

Newest Oldest

gimmeshelter | 14 years and 1 month ago

string(1) "1"
object(WP_User)#4885 (8) {
  ["data"]=>
  object(stdClass)#4897 (12) {
    ["ID"]=>
    string(6) "179659"
    ["user_login"]=>
    string(12) "gimmeshelter"
    ["user_pass"]=>
    string(34) "$P$BmIePGfdy110UNbG5bAmzMQ/K74ff/."
    ["user_nicename"]=>
    string(12) "gimmeshelter"
    ["user_email"]=>
    string(19) "michibock@yahoo.com"
    ["user_url"]=>
    string(27) "/forums/users/gimmeshelter/"
    ["user_registered"]=>
    string(19) "2017-08-10 14:03:39"
    ["user_activation_key"]=>
    string(0) ""
    ["user_status"]=>
    string(1) "0"
    ["display_name"]=>
    string(12) "gimmeshelter"
    ["spam"]=>
    string(1) "0"
    ["deleted"]=>
    string(1) "0"
  }
  ["ID"]=>
  int(179659)
  ["caps"]=>
  array(2) {
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["cap_key"]=>
  string(15) "wp_capabilities"
  ["roles"]=>
  array(2) {
    [0]=>
    string(10) "subscriber"
    [1]=>
    string(15) "bbp_participant"
  }
  ["allcaps"]=>
  array(4) {
    ["read"]=>
    bool(true)
    ["level_0"]=>
    bool(true)
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["filter"]=>
  NULL
  ["site_id":"WP_User":private]=>
  int(1)
}

I really appreciate everyone’s responses! Thank you very much.

vthatcher | 14 years and 1 month ago

string(1) "1"
object(WP_User)#4886 (8) {
  ["data"]=>
  object(stdClass)#4887 (12) {
    ["ID"]=>
    string(5) "72227"
    ["user_login"]=>
    string(9) "vthatcher"
    ["user_pass"]=>
    string(63) "$wp$2y$10$dxPw9wdNE4mc3t.OhS3nCuAHIRpesrOJrlf0f0UpXV2NteuR3F6ve"
    ["user_nicename"]=>
    string(9) "vthatcher"
    ["user_email"]=>
    string(22) "vthatcher@athccorp.com"
    ["user_url"]=>
    string(25) "/forums/users/vditty1979/"
    ["user_registered"]=>
    string(19) "2017-08-10 14:30:00"
    ["user_activation_key"]=>
    string(0) ""
    ["user_status"]=>
    string(1) "0"
    ["display_name"]=>
    string(9) "vthatcher"
    ["spam"]=>
    string(1) "0"
    ["deleted"]=>
    string(1) "0"
  }
  ["ID"]=>
  int(72227)
  ["caps"]=>
  array(2) {
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["cap_key"]=>
  string(15) "wp_capabilities"
  ["roles"]=>
  array(2) {
    [0]=>
    string(10) "subscriber"
    [1]=>
    string(15) "bbp_participant"
  }
  ["allcaps"]=>
  array(4) {
    ["read"]=>
    bool(true)
    ["level_0"]=>
    bool(true)
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["filter"]=>
  NULL
  ["site_id":"WP_User":private]=>
  int(1)
}

You cannot lock a rate until the loan is uploaded.  Once that is done-  a rate can be locked in 30 seconds.  Putting a Cap on the rate will limit the buyers exposure to what kind of rate he would be forced to take if he/she couldn’t obtain financing with a regular lender.  With the rate cap in play, the seller can’t request the buyer to use a hard money lender etc….  All it does is protect you and your down payment as the buyer.  

Rates are great though.  Feel free to contact me for todays rates.

    Vanessa Thatcher _ATLANTIC HOME CAPITAL_ Tel: 631-687-3510 x106 EFax: 631-918-5222 Cell: 631-672-4113

daveinbedstuy | 14 years and 1 month ago

string(1) "1"
object(WP_User)#4897 (8) {
  ["data"]=>
  object(stdClass)#4890 (12) {
    ["ID"]=>
    string(4) "3864"
    ["user_login"]=>
    string(13) "daveinbedstuy"
    ["user_pass"]=>
    string(34) "$P$BtJYyObAQmff2MQp.qFP7/kmwU1bBZ1"
    ["user_nicename"]=>
    string(13) "daveinbedstuy"
    ["user_email"]=>
    string(19) "djl135e54@yahoo.com"
    ["user_url"]=>
    string(55) "http://bstoner.wpengine.com/forums/users/daveinbedstuy/"
    ["user_registered"]=>
    string(19) "2017-08-10 14:23:53"
    ["user_activation_key"]=>
    string(0) ""
    ["user_status"]=>
    string(1) "0"
    ["display_name"]=>
    string(13) "daveinbedstuy"
    ["spam"]=>
    string(1) "0"
    ["deleted"]=>
    string(1) "0"
  }
  ["ID"]=>
  int(3864)
  ["caps"]=>
  array(2) {
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["cap_key"]=>
  string(15) "wp_capabilities"
  ["roles"]=>
  array(2) {
    [0]=>
    string(10) "subscriber"
    [1]=>
    string(15) "bbp_participant"
  }
  ["allcaps"]=>
  array(4) {
    ["read"]=>
    bool(true)
    ["level_0"]=>
    bool(true)
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["filter"]=>
  NULL
  ["site_id":"WP_User":private]=>
  int(1)
}

Mortgage contingencies have been standard practice for decades except for those brief periods where there are bubbles.

BHS | 14 years and 1 month ago

string(1) "1"
object(WP_User)#4885 (8) {
  ["data"]=>
  object(stdClass)#4884 (12) {
    ["ID"]=>
    string(5) "11181"
    ["user_login"]=>
    string(3) "BHS"
    ["user_pass"]=>
    string(0) ""
    ["user_nicename"]=>
    string(3) "bhs"
    ["user_email"]=>
    string(20) "smythraina@gmail.com"
    ["user_url"]=>
    string(18) "/forums/users/bhs/"
    ["user_registered"]=>
    string(19) "2017-08-10 14:14:48"
    ["user_activation_key"]=>
    string(0) ""
    ["user_status"]=>
    string(1) "0"
    ["display_name"]=>
    string(3) "BHS"
    ["spam"]=>
    string(1) "0"
    ["deleted"]=>
    string(1) "0"
  }
  ["ID"]=>
  int(11181)
  ["caps"]=>
  array(2) {
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["cap_key"]=>
  string(15) "wp_capabilities"
  ["roles"]=>
  array(2) {
    [0]=>
    string(10) "subscriber"
    [1]=>
    string(15) "bbp_participant"
  }
  ["allcaps"]=>
  array(4) {
    ["read"]=>
    bool(true)
    ["level_0"]=>
    bool(true)
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["filter"]=>
  NULL
  ["site_id":"WP_User":private]=>
  int(1)
}

When I was doing this, getting a rate lock was a much bigger hassle than getting pre-approved (which might include discussion of market rates and fees but no lock). Basically you had to apply for the mortgage to get the lock, which means tons of paperwork and paying the app fee etc.

The mortgage rate contingency does seem like a v good idea.

daveinbedstuy | 14 years and 1 month ago

string(1) "1"
object(WP_User)#4886 (8) {
  ["data"]=>
  object(stdClass)#4883 (12) {
    ["ID"]=>
    string(4) "3864"
    ["user_login"]=>
    string(13) "daveinbedstuy"
    ["user_pass"]=>
    string(34) "$P$BtJYyObAQmff2MQp.qFP7/kmwU1bBZ1"
    ["user_nicename"]=>
    string(13) "daveinbedstuy"
    ["user_email"]=>
    string(19) "djl135e54@yahoo.com"
    ["user_url"]=>
    string(55) "http://bstoner.wpengine.com/forums/users/daveinbedstuy/"
    ["user_registered"]=>
    string(19) "2017-08-10 14:23:53"
    ["user_activation_key"]=>
    string(0) ""
    ["user_status"]=>
    string(1) "0"
    ["display_name"]=>
    string(13) "daveinbedstuy"
    ["spam"]=>
    string(1) "0"
    ["deleted"]=>
    string(1) "0"
  }
  ["ID"]=>
  int(3864)
  ["caps"]=>
  array(2) {
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["cap_key"]=>
  string(15) "wp_capabilities"
  ["roles"]=>
  array(2) {
    [0]=>
    string(10) "subscriber"
    [1]=>
    string(15) "bbp_participant"
  }
  ["allcaps"]=>
  array(4) {
    ["read"]=>
    bool(true)
    ["level_0"]=>
    bool(true)
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["filter"]=>
  NULL
  ["site_id":"WP_User":private]=>
  int(1)
}

I think the first thing you should have discussed with the lender is the rate, otherwise, why bother.  The lender should offer to lock in that rate for a certain amount of time, usually 45 days.  If that is not enough time to close, get it extended but try to negotiate that now…rates could go up or down in 45 days.

Good luck.

gimmeshelter | 14 years and 1 month ago

string(1) "1"
object(WP_User)#4897 (8) {
  ["data"]=>
  object(stdClass)#4882 (12) {
    ["ID"]=>
    string(6) "179659"
    ["user_login"]=>
    string(12) "gimmeshelter"
    ["user_pass"]=>
    string(34) "$P$BmIePGfdy110UNbG5bAmzMQ/K74ff/."
    ["user_nicename"]=>
    string(12) "gimmeshelter"
    ["user_email"]=>
    string(19) "michibock@yahoo.com"
    ["user_url"]=>
    string(27) "/forums/users/gimmeshelter/"
    ["user_registered"]=>
    string(19) "2017-08-10 14:03:39"
    ["user_activation_key"]=>
    string(0) ""
    ["user_status"]=>
    string(1) "0"
    ["display_name"]=>
    string(12) "gimmeshelter"
    ["spam"]=>
    string(1) "0"
    ["deleted"]=>
    string(1) "0"
  }
  ["ID"]=>
  int(179659)
  ["caps"]=>
  array(2) {
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["cap_key"]=>
  string(15) "wp_capabilities"
  ["roles"]=>
  array(2) {
    [0]=>
    string(10) "subscriber"
    [1]=>
    string(15) "bbp_participant"
  }
  ["allcaps"]=>
  array(4) {
    ["read"]=>
    bool(true)
    ["level_0"]=>
    bool(true)
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["filter"]=>
  NULL
  ["site_id":"WP_User":private]=>
  int(1)
}

Thanks DIBs. The interesting thing is that I was pre-approved, but there is no interest rate on the pre-approval! Yikes. (I’m a first timer, so I didn’t catch that, my bad) I really, really appreciate your response. Back to the drawing board.

daveinbedstuy | 14 years and 1 month ago

string(1) "1"
object(WP_User)#4883 (8) {
  ["data"]=>
  object(stdClass)#4885 (12) {
    ["ID"]=>
    string(4) "3864"
    ["user_login"]=>
    string(13) "daveinbedstuy"
    ["user_pass"]=>
    string(34) "$P$BtJYyObAQmff2MQp.qFP7/kmwU1bBZ1"
    ["user_nicename"]=>
    string(13) "daveinbedstuy"
    ["user_email"]=>
    string(19) "djl135e54@yahoo.com"
    ["user_url"]=>
    string(55) "http://bstoner.wpengine.com/forums/users/daveinbedstuy/"
    ["user_registered"]=>
    string(19) "2017-08-10 14:23:53"
    ["user_activation_key"]=>
    string(0) ""
    ["user_status"]=>
    string(1) "0"
    ["display_name"]=>
    string(13) "daveinbedstuy"
    ["spam"]=>
    string(1) "0"
    ["deleted"]=>
    string(1) "0"
  }
  ["ID"]=>
  int(3864)
  ["caps"]=>
  array(2) {
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["cap_key"]=>
  string(15) "wp_capabilities"
  ["roles"]=>
  array(2) {
    [0]=>
    string(10) "subscriber"
    [1]=>
    string(15) "bbp_participant"
  }
  ["allcaps"]=>
  array(4) {
    ["read"]=>
    bool(true)
    ["level_0"]=>
    bool(true)
    ["subscriber"]=>
    bool(true)
    ["bbp_participant"]=>
    bool(true)
  }
  ["filter"]=>
  NULL
  ["site_id":"WP_User":private]=>
  int(1)
}

It certainly has been customary for many years, maybe not through the bubble.

If you puit a mortgage contingency in there with no cap, there may be language in the contract that allows the seller to find you a mortgage at any rate.  I doubt that language is there now but it used to be somewhat standard.

In reality, you shouldn’t be making an offfer on a place without being pre-approved and usually with a locked in rate.