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What is CAP?

Please help me understand what CAP is. Is it good or bad? This is the info that I was given.

lock 90 days +.125 rate for CAP
loc 120 days + .375 rate for CAP

Thank you!

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September 06 2013 - US
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Answers (4)

Profile picture for SeekingHomes
Thank you everyone for taking your time to reply! I appreciate it! I don't know why I just don't understand this "CAP" terminology and how it works! If it's a good thing or a bad thing.

Could you help me decipher this? I'm still in the mud about this. Thanks so much!!!

90 day lock- .125 Cap

120 day lock- .375 cap (on a fixed rate)

 

If you lock for 90 days, there is no add to your cost, but there is an .125 cap to the rate, so if you lock at 3.5% you are guaranteed 3.625 at the worse.  On the 120 day at 3.5%, the cap would be 5.875, which is what I sent you before.  Then, once you are inside 60days of closing, anytime during that 60 day period up to the time we draw documents, you get a 1 time free re-lock.  So if the rate goes down to 3.25%, you can lock at 3.25, and the cap totally goes away.  There is no cap added if you re-lock, it is only during the original lock that the cap is in play.

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September 09 2013

Clay is right on. Old Broker Shop methodology. The rate is maybe not locked at all?  It will be locked when 100% submitted with a specific lender? If so this can be a risky practice in this day and age, as markets can move heavily from one hour to the next. Hopefully they will drop your rate reciprocally if the market dictates.

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September 06 2013
The only CAP we in this industry refer to, involves a loan product called an ARM-  Rate CAPs mean that you'll never go above a certain rate...

As for the extensions you're referring to, I'm sorry you're even having to wait THAT long to complete your loan...  Find another lender.

Good Luck!
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September 06 2013
I do not have any investors that quote an extended rate lock that way but I believe that means the rate quoted on the 90 day lock can increase .125% and the 120 day can increase .375%.
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September 06 2013
 
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