Mortgage Rates: Slight Reprieve. High Risk Tomorrow


Yesterday, a recent losing streak for loan pricing boiled over and Mortgage
rose across the board.  Today offered a slight reprieve to yesterday’s
, but only in terms of improved borrowing costs.  BestExecution rates were unchanged.

Our ongoing guidance recently has been to take advantage of recent rate
offerings as soon as possible, noting that “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.” 

CURRENT MARKET*: The Best Execution 30-year fixed mortgage
rate is now 4.25% to 4.375% depending on your lender/scenario.  Several
lenders are still willing to offer lower rates, but those quotes carry with
them additional closing costs.  On FHA/VA 30 year fixed Best Execution
rose from what had been a solid 4.0% to 4.25% today.  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 3.625%. Five year ARMs are still
best priced at 3.25. ARMs seem to have bottomed out. 

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
 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: If you were hoping to lock before tomorrow’s high risk
events, now would be the
time.  Otherwise, you’re at the whim of
the market’s reaction to economic data and Bernanke’s annual speech at Jackson Hole.  Keep in mind, there’s big POTENTIAL movement
tomorrow, but that doesn’t guarantee we’ll see any.  Either way, we’d wait until markets have a
chance to put tomorrow’s overly-anticipated Jackson Hole speech in the
rear-view mirror and then reassess lock/float considerations. 

Roadmap: A Locked Rate Isn’t a Closed Loan
— must read


*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
: 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


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