Remember to set aside time to drive past your future home several times a week, daydreaming.
At closing, your earnest money will be credited toward your down payment; so don’t fret over how to pay your earnest money on top of your down payment.
What is earnest money?
Earnest money is a deposit you’ll pay at the time you enter into a contract. It shows the seller you have both the intention and ability to perform on the offer you’ve written. 1-3% of the price is a typical amount, but talk to your Realtor about what’s appropriate for the offer you are writing. You’ll probably start with a promissory note for earnest money, making good on this promise to pay once the seller accepts your offer. Your agent will let you know the timeline, amount and payee (earnest money is usually deposited with the title company).
What if you don’t close?
If you cancel the transaction for a reason permitted by your contract (say, a terrible home inspection completed in the allotted time), your earnest money will be refunded to you. If you fail to close for a reason outside of your contractual rights (say, a late case of cold feet), the seller gets your earnest money as liquidated damages for the harm you caused. Talk to your agent for help understanding the contingencies and timelines that protect your earnest money. Minding your earnest money is a big part of what they do.
Within 3 days of learning the address of the property you plan to buy, your Mortgage Coordinator will deliver a big ol’ bundle of forms to you to sign (30-40 pages). Each document in this package is one of three things.
Those pages with your personal information on them? That’s your application.
These forms are permission slips, providing us with your intent to proceed with your application and allowing us to verify things: your SSN, employment status, tax filing and so on.
The majority of the forms are disclosures we’re required to provide when you apply for a loan. If a form mentions acknowledgment of receipt… odds are it’s one of these disclosures.
We will send these forms to you through our secure document delivery portal. You’ll sign them using Docusign. It’s a terrific system, so (relative to how signing giant wads of documents can go) you should find the process surprisingly not unpleasant. If you prefer to stay analog, we can print papers for you to sign at our office or send them via FedEx (this is one time I’ll encourage you to let our technology do most of the work) (and save a tree).
We won’t lock until you tell us
Acceptance of your offer usually means you are eligible to lock an interest rate. Rate locks are always for a specific duration (40 days is typical). We won’t lock your rate until you tell us to. Lock means lock; once locked, whether the interest rate market subsequently gets better or worse, your rate is tied to the terms available the moment you locked. We will be in touch with detailed rate lock options and guidance.
Locking is time sensitive
Timing matters —if your rate lock expires before closing, you will incur a cost to extend the lock. If the timeline for your transaction is uncertain or unknown it may not be possible or advisable to lock until things firm up. Perhaps you are waiting for your old home to sell, for the bank to approve a short sale or unsure of when construction on your new home will be completed. If your closing date is undetermined we will usually hold off on your rate lock.
Rates are always changing
The interest rate market is dynamic. Rates change daily (even multiple times during the day). Although we can’t predict rates (wish we could!), we’re always here to answer questions about available terms and market activity. And, as soon as you are eligible to lock a rate we’ll reach out with information and guidance.
Watch rates like a pro
In an effort to give you as much information as possible, we offer access to daily mortgage bond market activity along with some interpretation on the day’s economic news and a calendar of the upcoming economic events that may change rates. Just click here (and here for a quick tutorial on how to make sense of those crazy charts).
Bad news is good news
The Fed does not control mortgage rates (although you can bet they wish they could!). Mortgage rates are driven (directly or indirectly) by activity in the bond market. In general, anything you would normally think of as bad news is good for interest rates and vice versa. Scary geopolitical events tend to hold rates down. Good employment reports and other pieces of economic news almost always nudge rates up. As a result, the stock and bond markets tend to move in inverse… if your stock portfolio is up, there’s a good chance rates are rising.
Independently of us, there are some good resources available for tracking trends in the broader interest rate market, both over the longer term and in the moment. The bellwether for fixed rate mortgages is the 10-year Treasury bill. Mortgage rates are higher than the T-Bill (the government is considered more creditworthy than you and me…[insert joke here]…so it gets to borrow money at lower rates), but rare is the day that the T-bill and mortgage rates trend in different directions. Watching the 10-year T-bill is another way to keep tabs on interest rate market activity.
Guess and correct
At any given time the bond market trades based on a consensus set of assumptions, chugging along with small day-to-day fluctuations until some new piece of information or event comes along to disrupt those assumptions. Then the market recalibrates for the new data before stabilizing again. The result: reasonably long periods of time with little-to-no change to rates, interrupted by bursts of volatility.
Everybody drives by their new home-to-be multiple times a day. This is perfectly healthy, normal behavior. Carry on.