Rate Lock Penalty - charing if don't close by time rate lock is up.

[Sunny Malik]

Hi everyone, 

Quick background, I'm a real estate investor with a high paying W2 job and credit score around 780. We're working on financing out of a current property and ran into some issues with the appraisal. As a result, we're calling another appraisal company out and it's going to take a few more days before we wrap up. 

The property we're dealing with is a bit unique as is the loan where it's a 1.0 DSCR and we're trying to optimize getting as much of our equity out as possible. At a 66% LTV, they're offering me 7.5% interest and $245k out. I was hoping to get closer to the 70% LTV and get $260k out. The only thing holding us back is again the appraisal so we're calling a new one since we had an appraisal done 5 months ago that came in at $430k and this new one is at $373k (there was a sqft discrepancy between the way each one was calculated). The new appraiser won't make any adjustments so we're calling a new appraiser to get the value of the home up so we can pull some more money out. The house is currently rented for $2,150.

My main issue is that the lender is claiming if I don't close by the 25th they are going to charge me 1.5bps per day until we close out since the rate lock expires. I was never told that nor have I experienced that before. I thought to reach out here and see if anyone's dealt with that before. Traditionally, I get re-pricing the loan per current market rates but charging me since we didn't close in 30 days since start doesn't seem right since the lender definitely had some lagging parts on their end and an insane due diligence process. 

Note this is my first time dealing with this loan broker and lender. 

I'd appreciate anyone else's experience in this and rec. on how to proceed forward. I have to refinance the loan soon as it's coming up on maturity on the 30th. With my current short term flip loan, I've already worked out a extra 30 day extension if I have to. 

Best, 

Sunny

[Brittany Minocchi]

66% LTV is an oddly specific number. You're at a 1.00 DSCR? With a 780 I'd think you should be able to get at least 70%, if not 75-80%. I don't have all of the info though. Is it a single family home?

As far as a rate lock extension, that's common. It varies by lender. As a broker, I have lenders that will extend the rate with no penalty at times, somes that charge per day with increasing per day costs for multiple locks, some that won't let you relock at all....