Mortgage Rates: Indecisive Attitudes

We’re back to and maybe even setting new year-to-date mortgage rate lows right now. These positive developments follow a short period of stagnation where
volatility in the secondary mortgage market kept us on edge,
but never really amounted to much on rate sheets. Loan pricing has drifted mostly sideways since setting new YTD lows on June 8th.
And even though we didn’t have far to travel, we’re back to those lows again. And maybe even teetering on lower lows….

SEE A CHART OF NEW YTD RATE LOWS

CURRENT MARKET: The “Best
Execution” conventional 30-year fixed mortgage rate is 4.50%. Some
lenders may be quoting 4.375%, but that offer is aggressive and will likely carry increased closing costs in the form of
origination fees.  These costs could be
worth it to applicants who plan to keep their new mortgage outstanding for long
enough to breakeven on the extra upfront costs.  On FHA/VA 30 year fixed
“Best Execution”  is 4.25%.  15 year fixed conventional
loans are best priced at 3.75%. Five year ARMs are best priced at 3.125% 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:   This is as good as it’s been all year.
Since the middle of November really.  If you’re on a short lock/float timeline
(15 days), now is a good time to considering locking. While a few
sessions of continued loan pricing rallies could lead to a lower overall
note rate offer, we’ve been here before (recently) and failed to see
investors commit to a sustained rally in the bond market. Our long-term
outlook still supports the case for lower rates though, however until we see
investors display a commitment to rally, we will be reluctant to advise
floating in the short-term, especially with volatility only 2-days behind
us.

CURRENT GUIDANCE:  As volatility continues in the secondary
market, we remind rate watchers that lenders are known to price loans from a defensive
stance when the broader bond market is in limbo. It might
seem safer to float when lenders are defensive by default,  especially if you’re able to act quickly
and are somewhat flexible with respect to the risk of slightly higher
closing
costs, but floating is really best reserved
for those operating on a longer-term timeline. This creates a buffer to allow for corrections when/if the market moves in an unfavorable direction. While a few
sessions of continued loan pricing rallies could lead to a lower overall
note rate offer, we’ve been here before (as recently as Friday) and failed to see
investors commit to a sustained rally in the bond market (today).

THE WEEK AHEAD:  Indecisive Attitudes Dictate Short-Term Directionality. Greece Headlines, Treasury Auctions  and the End of QEII. Read more about indecisive attitudes HERE.

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“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.

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
want/need.
   2. WHEN DO YOU NEED IT BY? Rates might not rally as fast as you
want/need.
   3. HOW DO YOU HANDLE STRESS? Are you ready to make tough
decisions?

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

Article source: http://www.mortgagenewsdaily.com/consumer_rates/217674.aspx

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