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Home loan borrowing costs ended the week near their most aggressive
levels of the year.
The chart below illustrates how borrowing costs have behaved with
respect to various mortgage note rates. If the line is moving up, the
closing costs associated with that note rate are rising, if the line is
moving down, the closing costs associated with that note rate are
falling. Notice the line has been moving lower since early April. Right
now borrowing costs are about as aggressive as they’ve been in 2011.
Best-Execution mortgage rates could be considered “in the process of” a
shift lower. This doesn’t mean all lenders are willing to quote lower
Best Execution mortgage rates, but a few are offering “below current
market” deals right now because the primary mortgage market is
highly-competitive.
CURRENT MARKET: The “Best Execution” conventional 30-year fixed mortgage
rate is 4.875%. If you are looking to move down to 4.75%, this offer
carries higher closing costs but could be worth it to applicants who
plan on keeping their new mortgage outstanding for longer than the next
10 years. Some lenders are pricing loans more aggressively because
competition is tight, so scattered sightings of 4.75% BestEx are
possible, but not on a wide-spread basis. Ask your loan officer to run a
break-even analysis on any origination points they might require to
cover permanent float down fees. On FHA/VA 30 year fixed “Best
Execution” is still 4.75%. 15 year fixed conventional loans are best
priced at 4.25%. Five year ARMs are still seen best priced at 3.50% but
the ARM market is more stratified and there is more variation in what
will be “Best-Execution” depending on your individual scenario.
PREVIOUS GUIDANCE: Before the Fed Announcement we said “if you have the
flexibility to wait until Thursday morning to see how rates fared,
that’s allowable if not advisable due to limited possible gains.” The
gains indeed turned out to be limited. But perhaps we saw the early
signs of a new, lower Best-Ex rate offering today. Thing is, we’re going
to be bouncing up and down a bit in the weeks between now and the end of
June, so the only way to approach is either automatically favor locking
to avoid risk, or wait around until you think rates confirm a bottom.
And if you think they’ve already bottom, today, rates are at or below
their best levels in recent months. If you floated through the
high-risk FOMC event, you’ve saved some money. If you think you can save
more, better read the rules below…
CURRENT GUIDANCE: Today’s chart should go a long way in helping short
term floaters decide whether or not rates have confirmed a bottom.
Without saying anything about the longer term possibilities, the short
term outlook becomes much more lock-biased when borrowing costs are at
or near their lowest levels and with a large gap lower to the next range
of historical costs. As good as it gets? There’s no way to know, but
in terms of probability, seeing significant improvements in closing
costs or rates is unlikely in the upcoming week. But the bottom line is
really this: a few weeks ago, after the bond market began bouncing back
from its worst recent levels, we shifted our guidance to allow for a bit
more risk. Today is the opposite, we’re decreasing our level of risk
tolerance at these levels, but with the caveat that we continue
entertain the possibility of further improvements in the longer run. If
you think you can save more, better read the rules below…
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?
READ MORE ABOUT THE BARRIER IN BEST EXECUTION
http://www.mortgagenewsdaily.com/consumer_rates/208606.aspx
FOMC RECAP
http://www.mortgagenewsdaily.com/mortgage_rates/blog/209135.aspx
—————————-
*”Best Execution” is the most 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 “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 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 fiscal frisking
that comes along with the underwriting process.
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Avg. Sales Price: $260,000
Avg. Days on Market: 98
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