Mortgage Rates: Opportunity Knocks

Mortgage rates re-entered record-low territory last week, one-day
after the Federal Reserve announced it would continue lending cash to
banks at a 0% interest rate…. explicitly for the next two-years. Since then consumer borrowing costs have risen marginally, but remain in record-low territory…

CURRENT MARKET*: The BestExecution 30-year fixed mortgage rate
is 4.25% in most cases.  Several lenders
are willing to offer 4.000%, and even 3.875% is possible for those interested
in buying down their rate, but 4.250% is the dominant quote. On FHA/VA 30 year
fixed BestExecution is 4.000%,  but 3.875 and even 3.750 are avaiable with additional closing costs.  15 year fixed
conventional loans are best priced at 3.625% but we’re seeing aggressive quotes
as low as 3.375%. Five year ARMs are still best priced at 3.25. ARMs seem to
have bottomed out. 


Though many lenders have greatly improved their consumer rate quotes over the
past six days, we must point out an increased amount of volatility in what
individual lenders are now quoting as their BestExecution rates.  This
is a factor of price volatility in the secondary mortgage
 Unfortunately when volatility picks up in the secondary
mortgage market, the cost of doing business gets more expensive for
(hedging costs go up). Those added costs are usually passed down to
via extra margin in rate sheets. These costs are unavoidable. The best
for mortgage rates right now is stability. Additionally, some lenders
have been adiusting their loan pricing strategies to better control the
flow of new loan originations.  To put it more simply, some lenders
are busier than others and can’t take-in anymore business, so they’ve
pushed rates higher to encourage consumers to either wait it out or find
another lender before rates rise.

GUIDANCE: If you missed the boat on record low mortgage
rates last
November/October, the opportunity is still out there for the taking. And
we think you should jump on it as soon as possible. The risks involved
in floating
have greatly expanded to include (1) lenders taking it upon themselves
negatively adjust rate sheets (to slow loan production) and (2) interest
rates finding a bottom and moving higher on their own.   The
frustration of missing out on “high 3’s” and instead getting “low 4’s”
seems nowhere near as bad as the frustration of missing out on a refi
opportunity (moving from 5% to 4.25% for instance) altogether.

MUST READ GUIDANCE: Refi Roadmap: A Locked Rate Isn’t a Closed Loan


*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


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