Mortgage Rates: Rally Takes a Breather

Mortgage rate watchers were reminded once again today of the threats they face when floating a loan on a shortened timeline.

Although consumer rate quotes were able to recover from early morning weakness, just like they did yesterday,  home loan borrowing costs have failed to make positive progress since “The Wall” came crashing down last Friday. The positive big picture tone in the bond market has been put on pause. We believe this stubborn behavior is factor of “debt auction concessions”.

CURRENT MARKET: The “Best
Execution” conventional 30-year fixed mortgage rate is 4.50%.  In some cases, 4.375% can make
sense, but will involve increased closing costs in the form of origination fees.  This 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 quot;Best Executionquot;  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 quot;Best-Executionquot; depending on
your individual scenario. 

PREVIOUS GUIDANCE:  With “The Wall” now torn down a path has
been paved for mortgage rates to continue on the path toward more
improvements. An extended rally
will not come without setbacks though. Short-term corrections are to be
expected along the way.  That means borrowers working on a shorter
lock/float timeline should remain defensive.
Your main goal is to
protect new, lower rate quotes from short-term market fluctuations. This
guidance has already proven accurate as borrowing costs rose slightly
today, driven by a “pre-auction price concession” ahead of tomorrow’s
3-year debt auction.   Although loan pricing did in fact deteriorate,
the overall bullish
trend is still very much in tact.  Intermediate to longer-term scenarios
are more than justified in floating. READ MOREWhat’s an auction concession?

CURRENT GUIDANCE:   With  “The Wall” now torn down a path has
been paved for mortgage rates to continue on the path toward more
improvements. An extended rally
will not come without setbacks though. Short-term corrections are to be
expected along the way.  That means borrowers working on a shorter
lock/float timeline should remain defensive.
Your main goal is to
protect new, lower rate quotes from short-term market fluctuations.  The overall bullish
trend is still very much in tact though.  Intermediate to longer-term scenarios
are more than justified in floating. READ MORE: The Day Ahead

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 ot rally as fast as you
want/need.
   3. HOW DO YOU HANDLE STRESS? Are you ready to make tough
decisions?

—————————-

“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 quot;breakeven analysisquot;
on your permanent rate buy down costs.

Important Mortgage Rate Disclaimer
: The quot;Best Executionquot; 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
quot;perfect borrowerquot; category, make sure you ask your loan originator
for an explanation of the characteristics that make your loan more expensive.
quot;No pointquot; loan doesn’t mean quot;no costquot; 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/214831.aspx

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