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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 CAPloc 120 days + .375 rate for CAPThank you!
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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.
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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