Provided courtesy of: http://www.mortgagenewsdaily.com/consumer_rates/
Although it was the focus of yesterday's discussion, the ability of the mortgage market to hold steady in the face of bond market weakness continues to impress. This is interesting because mortgage rates take direct cues from the bond market. That's still the case, but at the moment, the mortgage side of the bond market is playing with a stacked deck. If Treasuries are only a little bit weaker on any given day (like today), mortgage bonds and mortgage rates have been consistently holding their ground or actually improving.
Today was more of a "ground-holding" sort of day, but it depends on how any given lender responded to yesterday's bond market weakness. Those who adjusted rates higher yesterday were generally in slightly better shape today. Those who abstained yesterday were offering slightly higher rates today.
Regardless of the movement, the average lender remains very close to all-time lows and well under 3% for most top tier conventional scenarios. Purchases offer the best rates, followed by no-cash-out refis. Adding a cash-out option takes the average rate closer to 3%, but it takes additional risk factors like non-owner occupancy, lower FICO, or lower equity to see quotes over 3%.
...(read more)Like many industries, housing finance has a superficial layer that's fairly easy to understand for the average consumer. A person wants a home. They don't want to pay cash. They get a loan. Lower rates = lower payments. The end.
Shortly below that superficial layer of understanding, where a surprisingly high percentage of mortgage professionals operate, it's popular to discuss 10yr Treasury yields as a basis for mortgage rates. The only problem with viewing 10yr yields as the basis for mortgage rates is that they're not.
Anyone can observe this objective fact by jumping just a bit deeper into the rabbit hole and acquainting themselves with MBS (mortgage-backed securities). These are the true raw ingredients for mortgage rates even though they frequently mimic 10yr Treasury yield movement.
...(read more)Although many mortgage lenders were technically open for business last Friday, it's a well-known unofficial holiday. Mortgage rate movement requires bond market movement, and the post-Thanksgiving Friday invariably sees fewer traders trading fewer bonds. Even when bonds do manage to move, the people in charge of setting mortgage rates at various lending institutions tend to play it safe. In fact, many lenders simply leave rates wherever they were on Wednesday and then simply plan on getting back to work on Monday.
This particular Monday, however, the average lender is still in line with Friday's and Wednesday's rates. Some of them offered lower rates in response to strength in the bond market today. Those who abstained are expected to offer token improvements tomorrow, assuming the bond market shows up tomorrow morning in roughly the same shape it is right now.
...(read more)Mortgage rates have been operating relatively close to their all-time lows recently and today was no exception. The Fed raised some doubts as to how much longer that would be the case this afternoon when it released the minutes of its most recent policy meeting (from 3 weeks ago). The Fed questioned whether its mortgage-specific bond buying was having any ill effects. That's only a vague hint of a threat, to be fair, but on top of that, market participants also felt the Fed did less than expected to telegraph any enhancement of its bond buying plans (something that traders saw as a stronger possibility for the upcoming Fed announcement in mid-December).
...(read more)If you follow the MBS Commentary channel on this site, you will have already seen most of the following, but it's relevant for consumers as well. As far as mortgage rates are concerned, the increase in conforming loan limits doesn't have a direct impact, but it does change rate availability for those seeking certain loan amounts. There's a link below where you can see exactly what the new loan limit is for any given county.
If you'd like to read the official FHFA press release, here you go, but here's the skinny on the new conforming loan limit of $548,250 for 2021, up from $510,400 in 2020.
Which loans does this apply to?
Conventional, conforming loans (those sold to or securitized by Fannie Mae and Freddie Mac, which is a vast majority of the market), both refinances and purchases
...(read more)Everything is relative when it comes to following day-to-day movements in mortgage rates. Yes, they're technically higher than they were on Friday afternoon, but they're still lower than just about any other day... ever. Most prospective borrowers will see very little difference from last week. On average, the actual interest rate itself (aka, the "note rate") is unchanged, in fact. It's only when we get more granular and look at the closing cost side of the equation that rates got higher.
So if the note rate is the same as it was on Friday, why am I telling you rates are higher?
Rates are typically quoted in increments of 0.125%. When it comes to financing hundreds of thousands of dollars, 0.125% actually accounts for a pretty big difference as far as mortgage lenders are concerned. The bond market (which largely dictates day-to-day changes in rates) rarely moves enough for mortgage lenders to adjust rates by an entire 0.125%. But it does move!
...(read more)The National Association of Realtors' Existing Home Sales report is the broadest measure of housing market activity. It just hit a 14-year record for the 3rd month in a row.
It's not just existing homes. The new home market is crushing it as well. This week's data on Housing Starts (the ground-breaking phase of new construction) showed another solid step back toward the boomy levels of late 2019.
Builders may not be breaking ground as fast as they were a year ago (before covid), but that has everything to do with covid and nothing to do with demand. This week's record result for builder confidence reflects that.
To top it all off, this week brought another round of news articles proclaiming "all-time low" mortgage rates. But are they really?
...(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.