Mortgage Rate Watch

Provided courtesy of: http://www.mortgagenewsdaily.com/consumer_rates/

Mortgage Market is Freaking People Out
Tue, 31 Mar 2020 21:30:00 GMT -

There are too many counter-intuitive and frustrating developments in the mortgage market to comprehend all at one time, let alone discuss.  That's not a cop-out as much as it is a favor I'm doing for you.  If we tried to cover all of the nonsensical ground right here, this would become yet another wall of text in this era where they're all too common.  So I'll try to make this pithy and interesting.

The bottom line is that mortgage rates are all over the place, depending on the lender and the loan program.  Lender rates on the same program are farther apart than they've ever been.  Day-to-day and intraday movements are huge and seemingly random.  Whereas mortgage rates typically take a vast majority of their guidance from the trading levels in the mortgage bond market (95%+), the correlation is less than 50% right now.  On many mornings (like today), mortgage bonds say rates should be lower, yet they were unequivocally higher for most lenders.

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Mortgage Rates Are Amazing and Terrible
Wed, 25 Mar 2020 22:42:00 GMT -

Depending on what you're looking at, when you look, and where you look, mortgage rates could either be amazing or terrible.  Large, upstanding, secure, solvent, excellent lenders are as much as a full percentage point apart from one another on the same loan quote.  That essentially NEVER happens in the mortgage market--not with all of those qualifiers anyway. 

This is a symptom of the "mess" that coronavirus has made of the financial market.  For those that want to pretend there's some unique mortgage-specific issue that makes things more difficult for the mortgage market versus other sectors, look around you.  To whatever extent it's been "inconvenient" for the average 401k to lose more than 20% of its value in 3-4 weeks, the mortgage market has faced "inconveniences" on a similar scale.  Compared to airlines, oil, retail, food service, and a laundry list of other sectors hit hard by COVID, the mortgage industry merely gets a participation trophy in this race to terrible.

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Mortgage Market is Still a Mess, But a Hopeful One
Tue, 24 Mar 2020 22:36:00 GMT -

There is a LOT of misinformation flying around out there about the mortgage market, the Fed, and the various impacts on rates from the government's coronavirus response.  If you're in the market for big-picture overviews of all the relevant considerations with links to excruciating levels of technical detail, check out this compendium of the Fed's current mortgage bond buying efforts. If you're just here to find out what the heck is going on with mortgage rates, read on.

Rates are legitimately all over the place in a way we haven't seen, ever.  I'm including a significant amount of personal experience analyzing the financial crisis and more than a careless amount of research into historically similar levels of volatility as seen in April 1987.  March 2020 wins, period.  The sudden, unexpected, massive economic shift associated with the most serious global pandemic of our lifetimes is a big deal.  Could we say that the Spanish Flu or Great Depression were bigger deals?  Sure, maybe.  But those events happened in a different world.  In fact, the rise of the internet and rampant globalization of the economy in the 90's arguably makes even 1987 a poor comparison (and yes, I know there technically was internet back then, but were you able to liquidate your 401k from your cell phone's mobile app after reading a coronavirus headline in the bathroom in 1987?  Like I said... different world).

 

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The MOST Volatile Day For Mortgages
Thu, 19 Mar 2020 21:42:00 GMT -

Today was the most volatile day in the history of the mortgage market in many regards.  There were days in the early 80's that saw rates move by similar amounts, but none of them saw the underlying market for mortgage bonds move back and forth by such gigantic amounts.  What does this mean for you and your ability to buy or refi at the rates you may have heard about recently?

That depends on the rates you've heard about recently!  Many borrowers mistakenly believe the Fed's recent rate cuts mean that mortgage rates have fallen by an equal amount.  In fact, many loan originators report getting calls about 0% rates.  Unequivocally, there are no 0% mortgage rates!  If you're not 100% sure about why that's the case, please read this article.

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NO, You Can't Get That New 0% Mortgage Rate You Heard About
Mon, 16 Mar 2020 21:40:00 GMT -

Lots of words recently and lots to do for all of us, so let's make this simple.  

No, you can't get a that new 0% mortgage rate you heard about!  It doesn't exist.  That's the Fed Funds Rate.  It applies to overnight loans between the biggest financial institutions in the US.  If you are one of those institutions and you need money for less than 1 day, then have at it.

If you're a homeowner or buyer looking for a mortgage, you are looking at MORTGAGE RATES, which are different than the Fed Funds Rate. 

Could mortgage rates go lower?  Yes.  They probably will, but not by 0.5%, and not in a day.  They could also go higher.  One place they're not going is 0%.

If you're scratching your head or disagreeing with the words on your screen, read this twice: http://www.mortgagenewsdaily.com/consumer_rates/938844.aspx 

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What The Fed's Emergency Rate Cut Means For Mortgage Rates
Sun, 15 Mar 2020 21:45:00 GMT -

There are a lot of words here.  If you have a mortgage you might ever refinance (and especially if you think Sunday's emergency Fed news means you can now get a lower rate), read every last one of them.

Background: Fed's Emergency Rate Cut and QE

It's extremely important for the sound functioning of the mortgage market that consumers read and understand the following: THE FED DID NOT JUST CUT YOUR MORTGAGE RATES!

I'm not a loan officer.  I don't play one on TV.  I don't benefit from the decision you make on locking a mortgage rate.  I'm just a guy who watches and understands the day-to-day movement in average mortgage rates better than just about anyone.  It's one of the few things in this life I will claim to be the best at.  You can take what I'm saying to the bank, literally and figuratively. 

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Mortgage Rates Are Taking an Utter Beating (Relatively)
Fri, 13 Mar 2020 01:16:00 GMT -

In all my years of following mortgage rates I haven't seen anything quite like the current environment.  2008 came fairly close, but the vibe was decidedly different.  Rates were far from all-time lows back then.  When they moved to the lowest levels in a long time in May 2009, there was indeed a scary correction, but it lasted one day and then began to heal.  There was an even scarier move in late 2010, which was substantially similar to this past week in scope, but it followed 4-5 previous weeks of steadily higher rates.  By comparison, this week--the one that began with rates at all-time lows for many lenders--was a total blindside.

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First Time Home Buyers

First Time Home Buyers

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.

Mortgage Basics

Considerations Before You Buy

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:

  1. What type of home best suits your needs?
    You have several options when purchasing a residential property: a traditional single-family home, a townhouse, a condo, or a multi-family building with two to four units. Each option has its pros and cons, depending on your homeownership goals, so you need to decide which type of property will help you reach those goals. You can also save on the purchase price in any category by choosing a fixer-upper, although the amount of time, sweat equity and money involved to turn a fixer-upper into your dream home might be much more than you bargained for.
  2. What specific features will your ideal home have?
    While it's good to retain some flexibility in this list, you're making perhaps the biggest purchase of your life, and you deserve to have that purchase fit both your needs and wants as closely as possible. Your list should include basic desires, like neighborhood and size, all the way down to smaller details like bathroom layout and a kitchen that comes with trust-worthy appliances.
  3. How much mortgage do you qualify for?
    Before you start shopping, it's important to get an idea of how much a lender will actually be willing to give you to purchase your first home. You may think you can afford a $300,000 home, but lenders may think you're only good for $200,000 depending on factors like how much other debt you have, your monthly income and how long you've been at your current job.
  4. How much home can you actually afford? 
    On the other hand, sometimes a bank will give you a loan for more house than you really want to pay for. Just like with the purchase of a new car, you'll want to look at the house's total cost, not just the monthly payment. Of course, looking at the monthly payment is also important, along with how much down payment you can afford, how high the property taxes are in your chosen neighborhood, how much insurance will cost, how much you anticipate spending to maintain or improve the house, and how much your closing costs will be.
  5. Who will help you find a home and guide you through the purchase?
    A real estate agent will help you locate homes that meet your needs and are in your price range, then meet with you to view those homes. Once you've chosen a home to buy, these professionals can assist you in negotiating the entire purchase process, including making an offer, getting a loan, and completing paperwork. A good real estate agent's expertise can protect you from any pitfalls you might encounter during the process.

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.

  1. Keep saving.
    With homeownership comes major unexpected expenses, like replacing the roof or getting a new water heater. Start an emergency fund for your home so that you won't be caught off-guard when these costs inevitably arise.
  2. Perform regular maintenance.
    With the large amount of money you're putting into your home, you'll want to make sure to take excellent care of it. Regular maintenance can decrease your repair costs by allowing problems to be fixed when they are small and manageable.
  3. Ignore the housing market.
    It doesn't matter what your home is worth at any given moment except the moment when you sell it. Being able to choose when you sell your home, rather than being forced to sell it due to job relocation or financial distress, will be the biggest determinant of whether you will see a solid profit from your investment.
  4. Don't rely on making a killing on your home to fund your retirement.
    Even though you own a home, you should still continue to save the maximum in your retirement savings accounts each and every year. Although it may seem hard to believe for anyone who has observed the fortunes some people made during the housing bubble, you won't necessarily make a killing when you sell your house. If you want to look at your home as a source of wealth in retirement, consider that once you've paid off your mortgage, the money that you were spending on monthly payments can be used to fund some of your living and medical expenses in retirement.

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.

 

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