Mortgage Rates: High Risk Event Ahead
There's really no reason to overcomplicate things at this point.
There is a TON of economic data coming out tomorrow, all throughout the day. Then on Friday, it's the most important economic report of the month prints, The Employment Situation. All this action is arriving at a point where a tight mortgage rates range has just about been worn out. Mortgage rates are long overdue a directional move.
That means that if rates move higher, it could be a long time before you'd have access to the same rates again. If that scares you, then do something about it before Friday morning. If that doesn't scare you, but you can't or don't want to afford the risk of higher rates, same recommendation applies. And if you're flexible, or not even necessarily in need of a new mortgage, or if you have a crystal ball saying the jobs numbers on Friday will disappoint and the bond market will rally, then feel free to jump in for a swim on the The Risky River, where floating is either really fun, or really stupid, but you only find out in hindsight.
Am I being clear? Big risks on Friday! Don't know which way it will go but we're long overdue a directional move. If rates move higher, they will move higher fast. If rates move lower, it will be a slow process. Prepare accordingly.
It should also be noted that for a few moments today, it looked like the range was already breaking down and that rates would be getting worse. This sort of posturing isn't uncommon in the week that holds the Employment Situation Report. The range didn't break down though. It held together.The secondary mortgage market closed just inside the weakest part of the range. The secondary mortgage market is where mortgage backed securities are traded. MBS dictate mortgage rate. Closing costs did increase today, but naturally, we've seen no change in the best-execution rates and likely won't until the range is broken and moving in a new direction....which could be as soon as Friday!
On conventional 30 year fixed loans Best Execution is 4.875%. FHA/VA 30 year fixed home loans are best priced at 4.75%. If you're shopping for a 15 year fixed mortgage rate, we see a sweet spot between at 4.25%. On 5-year ARMs, we've heard of very well qualified borrowers being quoted rates as low as 3.50%.
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. Don't forget the intense fiscal frisking that comes along with the underwriting process
"Bext 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.
It's that HIGH RISK time of month again where the most influential economic report is soon to be released. The Employment Situation Report prints this Friday! This is the best chance we have to break out of the recent range. Thing is, we won't know until Friday if rates will stay in their rut or make a directional move. Higher or Lower. Both are just as likely at this point.