After a fairly
uneventful day yesterday, Mortgage
Rates improved today. In some cases
BestExecution rates may be lower, but in most cases, the improvements will be
seen in the form of lower closing costs for the same rates available yesterday.
Guidance below is unchanged from yesterday’s, but we made a few updates to
the current market rates below.
CURRENT MARKET*: The BestExecution 30-year fixed mortgage rate
is now solidly at 4.125%. Several lenders are willing to offer lower
rates, but in most cases, those quotes carry additional closing costs.
On FHA/VA 30 year fixed BestExecution 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 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. 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
GUIDANCE (unchanged): We’re back within an eighth or two of the best
rates of all time, increasing our bias toward locking. Time and
again lately, we’ve seen BestExecution rates hit this 4.125% level, with some
offerings slightly lower. The nearness to all time lows is a great
argument for locking. Over the years, we’ve seen a lot of frustration out
there from folks who waited for rates to get solidly into the high 3’s and
ultimately missed out on a refi opportunity altogether. While we have
witnessed frustration among folks who locked in the low 4’s only to get a
glimpse of 3.875%, that’s certainly been a lesser, different sort of
frustration. As long as you follow what we’re saying there, we will tell
you that future glimpses of 3.875% BestExecution rates are not out of the
question, but we feel like we should reiterate once more, they’re not
guaranteed and the current low 4% offerings can vanish fairly quickly.
If you wait for high 3’s, be ready to lock low 4’s at a moment’s notice, and
potentially at a loss from where you sit today.
Refi Roadmap: A Locked Rate Isn’t a Closed Loan —
*Best 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 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
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