Tuesday, September 13, 2011

Mortgage Rates: Unchanged From Friday

Yet another fairly uneventful day has come and gone in the world of Mortgage Rates.  For the most part, things were somewhere between "unchanged" and "slightly improved" today as despite bond markets being slightly weaker (higher in rate). September 12, 2011

Chalk this up to the fact that Friday's bond market gains were generally NOT priced into mortgage rate sheets and today's levels are pretty much in line with last Thursday's. 

CURRENT MARKET*: The 30-year fixed mortgage rate is now solidly at 4.125%. Several lenders are willing to offer lowerrates, but in most cases, those quotes carry additional closing costs.  A FHA/VA 30 year fixed is straddling  3.875% and 3.75%.  Deals can be structured with lower rates, but again, you'll pay more for those, so make sure you assess the time it takes to break-even on the extra expense.  15 year fixed conventional loans are best priced at 3.375%. Five year ARMs are best priced at 3.125%.

A note on the greater-than-normal variation in rate offerings between lenders.  There is an increased amount of variety in what individual lenders are now quoting as their best rates.  This is a factor of price volatility in the secondary mortgage market. Unfortunately when volatility picks up in the secondary mortgage market, the cost of doing business gets more expensive for lenders (hedging costs go up). Those added costs are usually passed down to consumers via extra margin in rate sheets.  Additionally, the recent rates rally makes lenders busy enough that some control their inbound volume by raising rates regardless of the secondary mortgage market in order to discourage new applications/locks.

GUIDANCE: We're close to a changing of the guard from 4.125 down to 4.0.  If you're aggressively pursuing that extra eighth of a percent of improvement in rate, and don't mind paying extra closing costs if the market moves against you, this is one of those rare occasions were we're close enough to moving lower and far enough away from moving higher than a short term could work.  We'd caution that much of the current strength in bond markets is due to uncertainty in Europe and the headlines that can change that outlook DO NOT adhere to a schedule.  In other words, things can change rapidly.  As a general rule, when 4.125% and 4.0% are the two best candidates for a rate, we favor locking due to the nearness to all-time lows.


*Best Rate Execution is the most cost efficient combination of note rate offered and points paid at closing. This note rate is determined based on the time it takes to recover the points you paid at closing (discount) vs. the monthly savings of permanently buying down your mortgage rate by 0.125%. When deciding on whether or not to pay points, the borrower must have an idea of how long they intend to keep their mortgage. For more info, ask you originator to explain the findings of their "breakeven analysis" on your permanent rate buy down costs.

*Important Mortgage Rate Disclaimer: The Best Rate Execution loan pricing quotes shared above are generally seen as the more aggressive side of the primary mortgage market. Loan originators will only be able to offer these rates on conforming loan amounts to very well-qualified borrowers who have a middle FICO score over 740 and enough equity in their home to qualify for a refinance or a large enough savings to cover their down payment and closing costs. If the terms of your loan trigger any risk-based loan level pricing adjustments (LLPAs), your rate quote will be higher. If you do not fall into the "perfect borrower" category, make sure you ask your loan originator for an explanation of the characteristics that make your loan more expensive."No point" loan doesn't mean "no cost" loan. The best 30year fixed conventional/FHA/VA mortgage rates still include closing costs such as: third party fees + title charges + transfer and recording. Don't forget the fiscal frisking that comes along with the underwriting process

CAUTION: MND guidance is speculative in nature. We don't have a crystal ball, we can't predict the future, we can only share our outlook. Making the following considerations extra important........................

What MUST be considered BEFORE one thinks about capitalizing on a rates rally?

   1. WHAT DO YOU NEED? Rates might not rally as much as you want/need.
   2. WHEN DO YOU NEED IT BY? Rates might not rally as fast as you want/need.
   3. HOW DO YOU HANDLE STRESS? Are you ready to make tough decisions?

 Contact First Capital: 310-458-0010

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