Provided courtesy of: http://www.mortgagenewsdaily.com/consumer_rates/
In the past 2 decades, there have been 6 months where mortgage rates rose at least 50 basis points. February 2021 was one of them. Moreover, it was one of only 2 of those months where rates rose without obvious provocation from a significant new, unexpected motivation (the last time that happened was December 2010. The other months were associated with 2013's taper tantrum, the 2016 presidential election, and the market dislocations in March 2020 as covid panic surged).
In other words, it was a really bad month for rates--so bad, in fact, that it has increasingly made sense to look for some relief simply because things don't tend to stay that bad for that long. Of course, if there's an exception to how rapidly rates "usually" spike, it has every right to occur after rates have spent an unusually long time prodding a record number of consecutive all-time lows, but it's fair to hold out some hope of reprieve nonetheless. Even if we assume the best possible economic outcomes in the months and years ahead, February's pace feels a bit overdone.
...(read more)Rising rates have been on the menu for months, but the drama kicked into a higher gear this week.
Maybe you heard about this? We've certainly been discussing it in recent newsletters (especially last week's). The rising rate narrative hit the mainstream this week as it was widely credited for doing damage to the stock market.
Perhaps you even caught one of Thursday's many mortgage rate headlines citing the spike in Freddie Mac's weekly mortgage rate survey. Freddie reported a jump in 30yr fixed rates from 2.81 to 2.97, their biggest in nearly a year.
Unfortunately, Freddie was low last week and they're WAY low this week. This is a common problem when things are this volatile. Although their survey is published on Thursdays, most of the responses are in by Monday.
...(read more)Mortgage rates WISH they were still at 2.97%--the number conveyed today by Freddie Mac's weekly survey. Freddie's data is accurate when it comes to capturing broad trends over time, but can really fall short when the bond market is experiencing elevated volatility.
To say that bond market volatility has been elevated recently is an understatement of extreme proportions. Things are happening that haven't happened in years. Some measures of volatility rival the March 2020 panic surrounding covid, only this time, there's no catalyst other than the market movement itself.
Today was by far the worst of the bunch when it comes to this most recent spate of...
As of today, you'd have to go back to June 2020 to see higher mortgage rates. This is courtesy of an ongoing move in the bond market that has longer-term rates/yields surging higher at the quickest pace since the pandemic began. The broader bond market has actually been signalling this sort of move since late last summer, but it wasn't an issue for mortgage rates for a variety of reasons. Now that the mortgage market has mostly exhausted its protective cushion against broader bond market volatility, when the broader bond market has a bad day, so do we.
It goes without saying that today was bad. Just look at the scoreboard, after all. But it also tried to be good.
...(read more)There are still 4 business days left in the month of February and thus still 4 days for the bond market to undergo an epic recovery that helps mortgage rates come back down. But traders and market-watchers alike have pined for--if not outright expected--such a recovery several times in the past few weeks only to be disappointed. Merely avoiding additional rate spikes would be a victory at this point.
Even if we can manage to avoid further rate spikes, February will still go down as the worst month for rates since January 2018 (March 2020 was worse at face value, but it's not really a fair comparison due to the unprecedented bond market reaction to the pandemic).
...(read more)
There's no precedent for the winning streak enjoyed by mortgage rates in the 2nd half of 2020. We've never seen so many new record lows in the same year, and we never spent as much time at those lows (not even close). All of the above makes it easy to get lulled into a false sense of low-rate security, but it's time to wake up.
Actually, the alarm has been going off for a while now. Previous posts pointed out the disconnect between the bond market and mortgage rates on multiple occasions in 2020. Near the end of the year, we warned against complacency in no unspecific terms.
Following the Georgia senate election, we've been tracking a surge in bond market volatility based on the expectation that it would increasingly spill over to the mortgage rate world.
...(read more)Volatility has returned to the mortgage market in grand fashion this week with many lenders quoting rates that are as much as a quarter of a point higher than they were last week. That means if you were looking at something in the 2.75% neighborhood on Friday, it could be 3.0% today. What gives?
The upward pressure is nothing new, really. It has existed in the broader bond market since August, but only recently began spilling over to the mortgage market. We've been discussing the increased risks of such a spillover in the event of a sharper bond market move and yesterday brought just such a move. Today was much more docile by comparison, but it didn't do anything heroic to push back against yesterday's weakness.
Still, there could be some promise of stability in the fact that the bond market was even able to hold steady today. Reason being: economic data and other events clearly suggested another bad day for bonds.
...(read more)The challenge of buying a home for the first time can seem so daunting that it's tempting to either just go with the first house that falls in your price range or continue to rent. To help you demystify the process and get the most out of the purchase, we'll examine what you'll need to consider before you buy, what you can expect from the buying process itself, and some handy tips to make life easier after you purchase your first home.
The first thing you'll need to determine is what your long-term goals are and then how home ownership fits in with those plans. It could be that you're simply looking to transform all those "wasted" rent payments into mortgage payments that actually give you something tangible. Others see home ownership as a sign of their independence and enjoy the idea of being their own landlord. Narrowing down your big-picture homeownership goals will point you in the right direction. Here are five questions to ask yourself:
The Buying Process
Now that you've decided to take the plunge, let's explore what you can expect
from the home buying process itself. This is a chaotic time with offers and
counter-offers flying furiously, but if you are prepared for the hassle (and
the paperwork), you can get through the process with your sanity more-or-less
intact. Here is the basic progression you can expect:
1) Find a home.
Make sure to take advantage of all the available options for finding homes on
the market, including using your real estate agent, searching for listings
online and driving around the neighborhoods that interest you in search of
for-sale signs. Also put some feelers out there with your friends, family and
business contacts. You never know where a good reference or lead on a home might
come from.
2) Consider your financing options and secure financing.
First-time homebuyers have a wide variety of options to help them get into a
home, including federally-backed loans and loans for homebuyers who don't have
the standard 20% minimum down payment. Your state may also have its own
programs for first-time homebuyers. Your mortgage interest rate will also have
a major impact on the total price you pay for your home, so shop around.
3) Make an offer.
Your real estate agent will help you decide how much money you want to offer
for the house along with any conditions you want to ask for, like having the
buyer pay for your closing costs. Your agent will then present the offer to the
seller's agent; the seller will either accept your offer or issue a counter-offer.
You can then accept, or continue to go back and forth until you either reach a
deal or decide to call it quits. If you reach an agreement, you'll make a
good-faith deposit and the process then transitions into escrow. Escrow is
a short period of time (often about 30 days) where the seller takes the house
off the market with the contractual expectation that you will buy the house -
provided you don't find any serious problems with it when you inspect it.
4) Obtain a home inspection.
Even if the home you plan to purchase appears to be flawless, there's no
substitute for having a trained professional inspect the property for the
quality, safety and overall condition of your potential new home. If the home
inspection reveals serious defects that the seller did not disclose, you'll
generally be able to rescind your offer and get your deposit back. Negotiating
to have the seller make the repairs or discount the selling price are other
options if you find yourself in this situation.
5) Close or move on.
If you're able to work out a deal with the seller, or better yet, if the
inspection didn't reveal any significant problems, you should be ready
to close. Closing basically involves signing a ton of paperwork in a very
short time period, while praying that nothing falls through at the last minute.
Take these 5 steps to help make the process go more smoothly.
Now that you know how much you can afford, check out our current mortgage rate comparison-shopping tool today.
Check your credit
Evaluate assets and liabilities
So you don't owe too much money and your payments are up to date. But how do you spend your money? Do you have piles of money left over every month, or are you on a shoestring budget?
A first-time homebuyer should have a good idea of what is owed and what is coming in.
You've decided to go for it. Buying a home can be thrilling and nerve-wracking at the same time, especially for a first-time homebuyer. It's difficult to know exactly what to expect. The learning curve can be steep, but most of the issues can be resolved by doing a little financial homework at the outset.
Take these 5 steps to help make the process go more smoothly.
The homebuyer's credit score is among the most important factors when it comes to qualifying for a loan these days.
To get a sense of where your credit stands, go to Kredit Karma to collect your credit report and score today, free and with no obligation.
Scour the reports for mistakes, unpaid accounts or collection accounts.
Just because you pay everything on time every month doesn't mean your credit is stellar, however. The amount of credit you're using relative to your available credit limit, or your credit utilization ratio, can sink a credit score.
The lower the utilization rate, the higher your score will be. Ideally, first-time homebuyers would have a lot of credit available, with less than a third of it used.
Repairing damaged credit takes time -- and money, if you owe more than lenders would prefer to see relative to your income. Begin the process at least 6 months before shopping for a home.
Evaluate assets and liabilities
So you don't owe too much money and your payments are up to date. But how do you spend your money? Do you have piles of money left over every month, or are you on a shoestring budget?
A first-time homebuyer should have a good idea of what is owed and what is coming in.
"If I were a first-time homebuyer and I wanted to do everything right, I would probably try to track my spending for a couple of months to see where my money was going," he says.
Additionally, buyers should have an idea of how lenders will view their income, and that requires becoming familiar with the basics of mortgage lending.
For instance, some professionals, such as the self-employed or straight-commission salesperson, may have a more difficult time getting a loan than others
Organize documents
When applying for mortgages, homebuyers must document income and taxes.
Typically, mortgage lenders will request 2 recent pay stubs, the previous 2 years' W-2s, tax returns and the past 2 months of bank statements -- every page, even the blank ones.
Buying a home can take a long time, but knowing what you need and where to find it can save time when you're ready.
Qualify yourself
Ideally, as a first-time homebuyer, you already know how much you can afford to spend before the mortgage lender tells you how much you qualify for. "How much house can I afford?" calculator will help.
By calculating debt-to-income ratio and factoring in a down payment, you will have a good idea of what you can afford, both upfront and monthly.
Though there's not a fixed debt-to-income ratio that lenders require, the old standard dictates that no more than 28 percent of your gross monthly income be devoted to housing costs. This percentage is called the front-end ratio.
The back-end ratio shows what portion of income covers all monthly debt obligations. Lenders prefer the back-end ratio to be 36 percent or less, but some borrowers get approved with back-end ratios of 45 percent or higher.
Figure out your down payment
It takes effort to scrape together the down payment.
There are programs that can assist buyers with qualifying incomes and situations.
Finally, speak with mortgage lenders when you're starting the process. Check with friends, co-workers and neighbors to find out which lenders they enjoyed working with and ask them questions about the process and what other steps first-time homebuyers should take.
Congratulations New Homeowner ... Now What?
You've signed the papers, paid the movers and the new place is starting to feel like home. Game over right? Not quite. Let's now examine some final tips to make life as a new homeowner more fun and secure.
Conclusion
This brief overview should help put you on the path towards filling in any gaps in your home-buying knowledge. Remember that the more you educate yourself about the process beforehand, the less stressful it will be, and the more likely you will be to get the house you want for a price you can afford - and with a smile on your face.