Best-Execution mortgage rates are unchanged vs. yesterday’s offerings.The closing costs tied to those
rates actually moved marginally lower today. This is contrary to what one might have expected given the price behavior seen in the secondary mortgage market.
This is important because it means some lenders absorbed loan pricing weakness that should have been passed down to consumers. So a few borrowers will enter tomorrow with more on the line than usual.
CURRENT MARKET: The “Best Execution” conventional 30-year
fixed mortgage rate is 4.75%. If you are looking to move down from there,
you’ll be assessing the trade-offs between higher closing costs and lower
monthly payments. This could be worth it to applicants who plan on
keeping their new mortgage outstanding for long enough to breakeven on the
extra upfront costs. On FHA/VA 30 year fixed “Best Execution”
is 4.50%. 15 year fixed conventional loans are best priced at 4.000%.
Five year ARMs are best priced at 3.375% but the ARM market is more stratified
and there is more variation in what will be “Best-Execution”
depending on your individual scenario.
PREVIOUS GUIDANCE: Had bond markets not received the gift of a
stronger-than-expected Treasury auction today, we’d likely be reporting a
moderate increase in borrowing costs. Moral of the story?
This week’s high-risk events are having an immediate and significant impact on
rates. Combine that with what continues to be nearly the best rate
offerings in over half a year …and a relatively strong bias toward locking
should be in place for most “soon to close”scenarios. Our
defensiveness about the short term does NOT rule out the broader improvements
that we’ve seen as possible for some months now.
CURRENT GUIDANCE: And we’ll keep on
reiterating the lock bias for shorter term lock/float scenarios. You may not lock on the perfect day
of the week, but you will still lock during one of the better weeks of the year. You’re
way ahead of the game. The possibility for an
intermediate to longer term rates rally remains on the table. READ MORE: Margin Squeeze Hits Headlines. False Start Baked into Bonds
What MUST be considered BEFORE one thinks about capitalizing on a
1. WHAT DO YOU NEED? Rates might not rally as much as you
2. WHEN DO YOU NEED IT BY? Rates might not rally as fast as you
3. HOW DO YOU HANDLE STRESS? Are you ready to make tough
*”Best Execution” is the most 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 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 30 year 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.