Mortgage Rate Watch

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

Mortgage Rates Finally Catching a Break
Tue, 02 Mar 2021 21:40:00 GMT -

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.

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Brutal Week For Rates But There's Hope (Hopefully)
Fri, 26 Feb 2021 22:49:00 GMT -

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. 

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Mortgage Rates Are Now Well Over 3 Percent
Thu, 25 Feb 2021 22:28:00 GMT -

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...

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Highest Mortgage Rates Since June 2020
Wed, 24 Feb 2021 21:33:00 GMT -

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. 

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February Easily The Worst Month For Rates in Long Time
Mon, 22 Feb 2021 23:06:00 GMT -

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). 

 

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Time to Wake Up To The New Mortgage Rate Reality
Fri, 19 Feb 2021 22:54:00 GMT -

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. 

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Yes, Mortgage Rates are MUCH Higher This Week
Wed, 17 Feb 2021 21:18:00 GMT -

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. 

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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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