Mortgage Rates: High Risk Events Produce Little Drama
Two high risk events came and went over the last 18 hours. The State of the Union address and the release of the FOMC Statement. Although the market's reaction to these events was not directionally friendly to rate watchers, the process was about as gentle as we could have hoped for.
The State Of The Union address and the release of the FOMC Statement were widely expected to shake things up. If you are a short term opportunist, they did just that. Upfront borrowing costs rose today by almost 3/8ths of a point (as a percentage of your loan amount, paid at closing). This intraday volatility is par for the course lately though. If you're a long term opportunist or even a medium termer...you didn't gain or lose much ground in the past 18 hours. The "best execution" conventional 30 year fixed mortgage rate is still 4.875%. That has not changed since late-December. On FHA/VA 30 year fixed loans "best execution" is still 4.75%. If you're shopping for a 15 year fixed mortgage rate, we still see a sweet spot at 4.25%. On 5-year ARMs, we've heard of very well qualified borrowers being quoted 3.50%.
READ MORE: The Varying Degrees of Opportunity in Mortgage Rates
Important Mortgage Rate Disclaimer:
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. Oh and we can't forget the intense fiscal frisking that comes along as part of the underwriting process.
"Best Execution" is
the most efficient combination of note rate 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 buydown costs.
Today's increase in closing costs could be the beginning of a larger and faster worsening in mortgage rates or it could be more of the same thing we've seen over the past month: THE RANGE. The point is that until the range is broken, there's no way to know for sure which side will prevail. Hence the warnings against complacency as the range trade exhausts itself. Everyone has a different perspective of "opportunity" in the mortgage market, if applicable, account for the notion that what you have available today may not be available tomorrow. Otherwise, we're still watching the range....