Q. This is a question we should know the answer to but don’t.  How long is a rate good for when you get a mortgage approval?  We put an offer on a house but the seller wants to delay the closing while they find something to buy.  Our agent says that we may have to pay something to hold a good rate for more than 45 days.  What should we do?  Mr. & Mrs. Agnew, Paoli, PA

A. That is a point that many people forget about when they are making an offer for a home.  In the past, lenders were willing to lock rates for 45 or even sometime 60 days without any extra fees. That was usually enough time for the transaction to finalize and close.
The typical agreement of sale used in this area provides that the buyer has to apply for a mortgage of the specific type they designate in the exact time they set forth.  For example, the buyers agree to apply for a 30 year fixed mortgage at an interest rate between 4.5 and 6.5 percent within 10 days of the execution of the agreement. Then the mortgage commitment letter is due so many days after that.  Sellers want to know that their house is really sold, so they do not like to wait a long time to find out if the buyers are able to get the mortgage they said they would apply for. 

 In your case, since the sellers are asking you to wait, they could pay the cost for the lender to commit for longer than the typical 30-45 days on the rate.  The cost is usually a quarter of a point (¼ of 1 percent of the loan amount). But this charge has gone up recently. In New York City, for example, buyers pay up to 2 points to lock rates for more than 30 days. So it is a good idea to be sure you know what the cost will be before finalizing the offer.
The timing of a home purchase has many moving parts.  The buyer may have a home to sell and the buyer of that home may have to give notice on a lease or need to be here for a job that starts some time in the future. School schedules, lender requirements, construction delays and many other things can impact the delicate balance.  I always think of dominoes when I picture how all the timing needs inter-relate.  It’s actually amazing how many houses change hands so smoothly!

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