Hi Jerry, We have signed a contract to purchase a $237,500 home with a close date of 4/1/03. As we discovered after we signed the April close date, we cannot lock on an interest rate until 60 days prior to closing. We're very concerned that the rates may go up between now and then. One suggestion was to lock in the end of Nov w/closing on Feb 1 and payments starting on March 1. However, we wouldn't get possession of the home until April1 and the current owners will not pay rent as they have no mortgage payment. What do you think about this and do you have any other suggestions or alternatives?

Thx, Nancy



Dear Nancy:

You are in a difficult situation but you have several options so don’t panic. You may not want to close early and let the current owners live rent free for two months. Doing so will cost you roughly $2,500 in interest. Some lenders offer 180 day locks however, the rate is slightly higher and they generally require that you pay a fee upfront to lock in this rate. This fee could be substantial but it is a form of insurance if you are willing to pay the price. Interest rates have been increasing for the last 2 weeks but many experts contend that the lack of strength in the economy will keep interest rates under 7% for the foreseeable future. If interest rates do increase substantially you may want to consider a hybrid ARM or a balloon note to achieve your target interest rate. Best of luck to you.

Jerry www.midwestmortgagecapital.com 314.787.2900