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Shoud we add an interest rate contingency?

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Shoud we add an interest rate contingency?

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We are in attorney review for a house and after my mortgage broker reviewed my contract he said that he strongly recommends adding an cap on the interest rate (contingency). I feel like this was a miss by my agent which should have put it in the contract from the start. If I have my atty add this now, will it cause problems? My atty mentioned that it would spook the sellers, however, I do want to be protected. These sellers also have another offer on the table and I feel that this would sway the boat the other way... Any thoughts?

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September 27 - US

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Linda Strasberg, "L Strasberg"
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Linda Strasberg, "L Strasberg"

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Why hadn't you been pre-approved for a loan amount and monthly for the home you put the offer on prior to being shown any homes?

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September 30

Song San, "song san"
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Song San, "song san"

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I don't know what state you are in, but I have not dealt with a loan where there is an interest rate contingency, only loan contingency. Many times I told my principles to do a pre-approval so they know how much they can borrow and the interest rate before looking. This would also make them a serious buyer to the seller.

The seller doesn't need to accept your interest cap contingency. And depending on how far you are with the purchase, they can try to bypass you and go to the next buyer. Unless your credit score just changed recently and dramaticly, I can't imagine how your interest rate can jump up by 2%, say from a 6% to a 8%. The banks would be very scare to lend to you.

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September 27

Michael Russell, "real estate mike"
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In my state it's not a contingency put part of an amendment, that is part of the contract. The cap rate on the mortgage is always put in the box. but for your example let's say it wasn't. Then a number would simply be inserted and initialed next to by both buyer(s) and seller(s). If there is no place for the interest rate in your current contract then you will I suppose want to add it either by amendment or addition. Does it have to be a contingency? I don't know in your case. If it does so what? Do you really think the other offer is an all cash deal, I doubt it. That other offer most likely has an interest rate cap also. Rates are low right now so I don't really see your dilemma. Have you locked your rate? These are not questions someone on this site can specifically assist you with. Your agent, attorney and lender have all your info and can best advise. best of luck

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September 27

wetdawgs
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At this date, if you add contingencies be aware that the sellers do not have to accept them.      If you wish to put a cap on it, put it something like 2% higher than the interest rates that you are currently discussing OR, better yet, lock in a rate on Monday.

If your ability to purchase the house is so close to a go/no-go situation with a minor fluctuation in interest rates, then I wouldn't be buying the house in the first place.

Is this a miss by your agent?   The ability to qualify for financing probably was in the contract as a contingency, so that would indirectly cover interest rate variations because if they leap up and you don't qualify, you have an out.

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September 27

Dana Kolodney, "Dana Kolodney"
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Dana Kolodney, "Dana Kolodney"

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Interest rates are stable. If we were in a volatile market it would be a concern. However rates are remaining fairly stable. Contact your lender and make loan application. Once you make application you can lock your rate. Rate locks are usually in 30 day increments. If closing exceeds the lock period you are stuck with worse case scenerio. Therefore make sure you discuss the length of the lock period compared to the time needed by the lender to close your loan. Longer lock periods cost more money. Usually .250 xtra for each 30 days. If you go back to the seller to add contingencies to the contract you jeopardize the deal. The rate will be the rate no matter what house you buy.

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September 27

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