Insider Tip #6 to Buying a Bank Owned or REO property in Orange County
In previous blog entries, we suggested ways to avoid per diem charges for delays in the close of escrow when buying bank owned homes in Orange County. There are other mine fields waiting for you if your transaction is delayed and you are not prepared. One devastating result of not anticipating delays in closing has to do with your loan. This is the topic of today’s blog.
Once you have reached an agreement with the bank to purchase an REO property in Orange County and you have a fully executed contract, you will work with your lender to lock your interest rate and loan terms. The purchase conrtact will stipulate a close of escrow date or length of escrow expressed in a number of days. Usually, banks will require a 30 day escrow. You loan lock guarantees your interest rate and loan terms and is valid for a certain number of days from the time it is locked. Always work with your lender, and let them know up front you are buying a bank owned home, so they have all the information they need to set the term of your loan lock based on the close date. You want to give youself some pad in case of delays in closing – because if the escrow does not close before the loan lock expires, you will have to pay to extend the lock or accept a potential increase in the interest on the loan – regardless of the cause of the delay.
For example, if your contract is for a 30 day escrow, you would certainly be cutting it very close with a 30 day loan lock. At least ask for a 45 day lock, and even longer if available and there is no down side to the longer lock. Some loan programs have limits on the lock period – your lender will know best how to advise you.
That’s it – just put appropriate pad in your loan lock period in order to avoid unexpected changes in your interest rate or unexpected additional charges on your loan. Now go find a great REO home to buy in Orange County – and make a great deal!
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