Mortgage Rates: The Return of Record Lows
The craziness continues...
Mortgage rates and most things related to bonds have ventured back into record setting territory. Stock markets are at the tipping point of full blown panic and interest rates have been the main beneficiary.
IMPROVED CURRENT MARKET*: The BestExecution conventional 30-year fixed mortgage rate has improved to 4.250%. Some lenders are even offering 4.00% but that quote carries with it additional closing costs. On FHA/VA 30 year fixed BestExecution is now 4.00% with some lenders willing to go as low as 3.875% (includes additional closing costs). 15 year fixed conventional loans are still best priced at 3.75% but we've seen very aggressive quotes at 3.625% too. Five year ARMs are still best priced at 3.25. ARMs and 15 year quotes seem to have bottomed out.
It's important that we point out an increased amount of variation in what individual lenders are quoting as their BestExecution rates. This is a factor of price volatility in the secondary mortgage market. 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.
GUIDANCE: Our longer-term mortgage rate outlook has finally come true. To that end, if you've been waiting since last November for rates to recover, THEY HAVE and you should strongly consider locking today. If your rate lock decision depends on the timing of our outlook coming to fruition, IT HAS and you should strongly consider locking. WHY? Tomorrow's Employment Situation Report will either confirm recent borrowing cost improvements with a weak read on the labor markets or will suggest that rates need more confirmation of long-term economic weakness, which would lead borrowing costs higher. While there's definitely a chance of a "less-than-exciting" market reaction to the report, the potential for a knee-jerk bounce higher on unexpectedly strong data is a risk worth noting. That doesn't mean we feel mortgage rates have bottomed, we just don't feel it's worth the risk of losing record low quotes again. To be perfectly honesty, we do believe mortgage rates have room to rally further, especially when considering that lenders have been slow to pass along gains. We backed-up that perspective in this post: Bond Market Officially Repeats History. Reality Restored <-- MUST READ
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 want/need.
2. WHEN DO YOU NEED IT BY? Rates might not rally as fast as
you want/need.
3. HOW DO YOU HANDLE STRESS? Are you ready to make tough decisions?
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*BestExecution 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 Disclaimer: The BestExecution
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