Mortgage Rates: No Change in Outlook. Choppy Waters in Short Term
QUICK RECAP OF LAST WEEK: QII came as expected on Wednesday but mortgage rates didn't rally until Thursday. At that time, 3.75% was phantom. Lenders were quoting par rates as low as 3.875% in the broker/direct banker market while 4.25% remained the "no origination points" quote on 30 year loan paper. 4.125% was on the board for no points at a small minority of lenders , but you had to be through the underwriting process on a rate/term or purchase to hit this mark. 4.00% + no points was reportedly out there but you had to be 100% sure you were gonna retain the mortgage for at least the next 5 years for that permanent buydown to make sense economically.
BTW....
"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 recordation + escrows (things like upfront MIP (if required), property taxes, homeowners insurance, accrued interest)".
The best day to lock last week was THURSDAY. Consumer borrowing costs inched up on Friday after a better than expected AND improved report on the jobs situation led to profit taking in the bond market and forced lenders to reprice for the worse. This "inching" did have a larger effect than usual on the sentiment of consumers because less lenders were willing to quote 3.875% and 4.00% + no point deals were wiped out. 4.125% was definitely still on the table for the taking though...
Mortgage rates are up against a slow economic environment in the week ahead. The data calendar is sparse and influential events are generally limited to politics and debt auctions. This leaves lenders more vulnerable to volatility in the secondary mortgage market so there is an increased potential for mortgage rates to move in a wider range. That said, if you're still floating it's because you read the blog on Thursday night, before the Employment Situation Report....
From: Patience Pays Off For Mortgage Rate Watchers
"The Employment Situation Report prints tomorrow morning at 8:30am eastern. This data is the most influential report released to the market on a monthly basis. It shapes investment strategies and shifts trader perspective. I am still confident that mortgage rates will eventually extend their rally, but I have to warn you, the float boat might take on some water if the report is better than expected. This means you cannot panic if we experience a short term spike in mortgage rates in the aftermath."
MY OUTLOOK: SEE ABOVE STATEMENT. ****NO CHANGE NO CHANGE NO CHANGE****
Savy?
It is very hard for me to lump all quotes and offers into one index, but this is the range we're looking at....
The best conventional/FHA/VA 30 year fixed mortgage rates are in the 4.000% to 4.250% range for well-qualified borrowers. 4.000% is on the board but it carries an expensive price tag. 4.125% costs origination points but it's worth it if you plan on holding your mortgage for at least the next 5 years. 4.25% is widely quoted at no points plus the above discussed closing costs. The best conventional/FHA/VA 15 year fixed mortgage rates are in a range between 3.375% and 3.625% with the same closing cost characteristics of the 30 year range. I won't endorse an ARM. The more aggressive rate quotes are generally only seen in the broker/direct banker market.
Important Mortgage Rate Disclaimer: Loan originators will only be able to offer these rates on agency conforming loan amounts to borrowers who are 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 downpayment 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.
The segmented nature of the primary mortgage market makes it critical for a consumer to do more than ask their potential originator for a rate/quote though. You should first be asking questions like...
- Can you estimate a closing date on my purchase/refinance?
- How do you order your appraisals? Who do you order them through? Have you experienced processing slowdowns related to appraisal issues?
- Will my loan be sold/brokered in the secondary market? If you intend to sell/broker my loan in the secondary market, how many investor options to you have?
- Can you provide a breakeven analysis to help me consider my permanent buydown options?
THE BEST GUIDANCE I EVER GAVE....
You have to let the loan officer earn their commission. That's how you "ride the float boat" in this environment...make sure you have a damn good skipper. Plain and Simple.