Mortgage Rates: Regaining Some Ground

Last week the intense rally in bond markets helped mortgage rates reach
their best levels of the year, but the rally came to an end on Friday.  Then on Friday evening, news the SP
downgraded the US Sovereign Debt Rating set a chain of events in motion that
completely rocked the markets.  Despite
steep losses in stocks and insane rallies in Treasuries, the Secondary Mortgage
Market has been more of a bystander today, leaving Home Loan Borrowing Costs
slightly better than Friday, but not as good as Thursday.

CURRENT MARKET*: The BestExecution 30-year fixed mortgage
rate is 4.250%. Not many lenders are willing to offer 4.00% but 4.125% is
available if you’re willing to pay additional closing costs.  On FHA/VA 30
year fixed BestExecution is 4.00%. Fewer lenders willing to quote 3.875%
(includes additional closing costs).  15 year fixed conventional loans are
still best priced at 3.75% and we’re still seeing aggressive quotes at 3.625%.
Five year ARMs are still best priced at 3.25. ARMs and 15 year quotes seem to
have bottomed out. 

It’s important that we point out an increased amount of variation in what
individual lenders are quoting as their BestExecution 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.

GUIDANCE: We’ve realized a good portion of the rates rally we’d been
holding out for.  And while things could still improve, it’s an especially
volatile time for the broader markets, meaning lenders have been slow to pass
along gains.  Mortgage rates DO NOT like
volatility and uncertainty.  Relative to
various market levels, rate sheets are conservative yes, but there’s no telling
when things will get better, and sadly, always a chance that they won’t get better
at all.  Incidentally, we lean toward the
possibility of them getting better, but the timing and flexibility required to
capitalize on that possibility makes floating a less attractive choice for most
scenarios right now, especially when what’s on the table is already so much
better than everything else 2011 has to offer and fairly darn close to all time
low rates. 

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
   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


*BestExecution 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 BestExecution 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

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