How the Extended Lock Program Helps Homebuyers and Builders Alike

The U.S. economy is in a period of sustained strength. This has encouraged all sorts of economic activity, like homebuying and homebuilding, as sentiment among consumers and constructors remains high. However, one consequence of all this momentum is that federal rates are rising once again. After lying dormant for most of the post-recession years, rates are increasing, which has a big impact on mortgages.

Most borrowers understand the effect prevailing federal rates have on their loans terms, but may overlook one crucial area. A lot can change in the time between when a homebuyer first contracts a homebuilder and when the home is actually finished. If rates move higher between that preliminary agreement and the closing, total costs could go up or borrowers could be prevented altogether from qualifying.

Avoiding such scenarios is a priority for buyers, builders and lenders. And Extended Lock, a new product offered by Vectra Bank, is aimed at just that.

What is Extended Lock?

The Extended Lock program allows consumers to freeze rates for the time period leading up to the actual beginning of the loan. This eliminates the risk that buyers start off the process qualifying at one rate, only to reach the end and pay more or not qualify at all because rates were lifted in the meantime.

How is Extended Lock beneficial?

They clear advantage to consumers is they don't endure an emotional and financial rollercoaster between contracting a homebuilder and closing on the mortgage. Consumers putting earnest, hard-earned money down may be devastated to learn that rate increases dramatically reduce their ability to qualify or meet revised expected payments. Extended Lock can prevent such fluctuations, keeping homes affordable and consumers motivated.

Builders benefit from Extended Lock by ensuring they won't have to commit resources to building a product that won't be bought in the end. The program can give builders and consumers the same sense of guarantee.

How does it work?

Extended Lock is offered to borrowers seeking 15-year and 30-year fixed-rate mortgages. Rates can be locked in for 90, 180, 270 or 365 days preceding the start of the loan, depending on the consumer needs. Vectra also works with builders to get an idea for how long construction may take, which helps inform how to lock the rate appropriately. Borrowers pay an upfront fee equal to 1 percent of the purchase price, and when ready to close, do so at the rate that was locked in.

While launching only relatively recently, Extended Lock has garnered positive feedback from borrowers and builders alike. By assisting consumers who target lower- priced homes, who don't have the liquidity for a large down payment or who are buying in competitive markets, Extended Lock helps keep homeownership affordable and possible, while also aiding builders. Contact Vectra Bank today for more information.