A seven day losing streak was finally put to an end yesterday…. just in time for a
high-risk event. The official Employment Situation Report will be released tomorrow morning at 8:30am. This report is a market mover…..
CURRENT MARKET: The “Best Execution” conventional 30-year
fixed mortgage rate is still 4.875%. For those looking to permanently buy
down their rate to 4.75%, this quote carries higher closing costs. The upfront
fee to permanently buy down your rate to 4.75% is not worth it to every
applicant, we would generally only advise the permanent floatdown if you plan
to keep your new mortgage outstanding for longer than the next 10 years.
Ask your loan officer to run a breakeven analysis on any origination points
they might require to cover permanent float down fees. On FHA/VA 30 year fixed
“Best Execution” is 4.75%. 15 year fixed conventional loans are best
priced at 4.25%. Five year ARMS are best priced at 3.50%.
PREVIOUS GUIDANCE: In the week ahead we are looking for the market to
paint a clearer picture of its directional bias. Locking is advised
for those working on a short-term time frame. For long-termers, if you
need to lock a loan in the next month, it’s time to shift your bias from
aggressive/neutral to defensive/neutral.
CURRENT GUIDANCE: Even after this week’s auction cycle has
out, the market is still giving off the impression that rates are “on a
to move either way after the Employment Situation Report tomorrow. As
always, this is a high risk event. If you can’t afford or don’t want to take a risk, lock now. If you’ve got time, flexibility, or otherwise are not in any particular rush or pressing
lock your loan, we still think it’s possible that rates make one more run lower in the months ahead.
What MUST be considered BEFORE one thinks about capitalizing on a rates
1. WHAT DO YOU NEED? Rates might not recover as much as you
2. WHEN DO YOU NEED IT BY? Rates might not recover as fast as you
3. HOW DO YOU HANDLE STRESS? Are you ready for MORE VOLATILITY in
the bond market.
What’s at risk?
A shift higher in “Best Execution” mortgage rates.
“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 buydown 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 intense fiscal frisking that comes along with the underwriting