Mortgage Rates: Fighting Back

Home loan borrowing costs declined significantly today, leading to an
improvement in the conventional 30-year fixed Best-Execution mortgage rate.

Today’s gains come hard on the heels of a recent spike in home loan borrowing costs (Check
out this chart: VISUALIZING THE SPIKE).  The counter-currents seen today could prove to
be a minor correction in a broader trend or a legitimate reversal leading conventional 30-year fixed
Best-Execution rates back to their recent perch at 4.875%.  We’ll know more about which scenario is more likely as each day passes this week.

UPDATED CURRENT MARKET: The “Best
Execution” conventional 30-year fixed mortgage rate has fallen to 5.00% after spending three days at 5.125%.  Some lenders may be willing to go down to 4.875% but that is a best-case scenario.   5.00% is a much more common Best Execution quote.  In the case of 4.875%, this offer carries
higher closing costs but could be worth it to
applicants who plan to keep their new mortgage outstanding for longer than the
next 5 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 still 4.75%.  15 year
fixed conventional loans are now best priced at 4.25%. Five year ARMS are
still stratified and there is more variation in what will be
“Best-Execution” depending on your individual scenario. 

VERY IMPORTANT CAVEAT: Mortgage rates
are being quoted in a wider range right now due to recent regulatory changes in
Loan Officer Compensation policies. Because of this, the Best-Execution
mortgage rate can vary greatly from lender-to-lender. The quotes we have listed
above are on the more aggressive side of the primary mortgage market. 

PREVIOUS GUIDANCE:  The week ahead is busy.  Here’s our full write up…  While we do see a
glimmer of opportunity for recent trends in rates to moderate, that would rely
on an almost perfect alignment of the heavens in terms of economic data,
corporate earnings, and Treasury auctions.  Thus, the same guidance
remains in place until such a thing happens.  Plain and simple: We’d be in
lock mode until rates aren’t rising any more, or at least until rates show some
motivation to stop rising.  We’ll let you know when we feel it’s safe to
confirm that.

CURRENT GUIDANCE: The glimmer of opportunity for recent mortgage rates trends to moderate is still alive after the first of 4 days that will likely decide its
fate.  This actually complicates matters
because it provides potential enticement for those inclined to float.  Attempting to take advantage of this
mini-recovery is highly speculative and highly risky.  While we’d continue to advise anyone who
cannot afford the risk of a higher rate toward locking, those with flexibility
got enough of an improvement in rates today that IF things don’t keep
improving, you’d likely have a chance to lock in with rates “only” as bad as
they were yesterday or Friday. 

READ MORE: Reassuring Rates Rally Gives Pause to Bearish Bias

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

   1. WHAT DO YOU NEED? Rates might not recover as much as you
want/need.
   2. WHEN DO YOU NEED IT BY? Rates might not recover as fast as you
want/need.
   3. HOW DO YOU HANDLE STRESS? Are you ready for MORE VOLATILITY in
the bond market?

 

 

 

———————

“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 intense fiscal frisking that comes along with the underwriting
process.

Article source: http://www.mortgagenewsdaily.com/consumer_rates/207203.aspx

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