The bond market was closed yesterday in observance of Columbus Day so mortgage backed securities did not trade. Regardless of that, several lenders issued rate sheets, however as is typical of holiday pricing strategies, rate sheets were conservative. Most lenders were offering 4.875% as the par rate for well qualified consumers. So far this morning, MBS prices are higher on the day which should allow lenders to issue more aggressive loan pricing (not as aggressive as last week).
We do not receive any market moving reports today but the action does pick up tomorrow with the release of the Retail Sales report. MBS typically benefit with a lower than expected reading and economists’ surveyed are expecting retail sales to post a month over month decline of 2.1%. The only items of any significance today will be a couple speeches by Fed members Donald Kohn and William Dudley. Any time Fed members speak, market participants do pay attention for any clues to future monetary policy and their economic outlook.
The House of Representatives passed a bill yesterday aiming to extend the First Time Home Buyer Tax Credit. Before you get to excited, it appears that it will only be extended for veterans of our armed forces for up to 6 months. To qualify, the veteran must have served overseas for 90 days in 2009. If you are a first time home buyer looking to take advantage of the up to $8000 tax credit, the clock continues to tick. It is set to expire after November 30th so get your application in with your lender.
Many lenders are already posting longer turn times on loan approvals due to the relative increase in loan application volume. If for any reason your loan closes after November 30th, you will not get the tax credit. If you are still looking for a property, contact your loan professional and ask if you can submit your application with a “to be determined” address. If your lender does not offer this, they should! You might want to find a new one if this occurs. By submitting your loan with a TBD address, the lender will pre-approve your loan which will make the final approval much quicker once you find a home. I would recommend when submitting a loan application with a TBD address to use the highest sales price that you feel you would consider. If a lender approves you for a $200,000 loan, but turns out the sales price is only $190,000 it is much easier to get the final approval versus being approved at $190,000 but then moving higher in price. Note: you cannot lock your loan with a TBD address.
Reports from fellow mortgage professionals indicate the 30 year conventional par mortgage rate is in the 4.75% to 5.00% range for well qualified consumers. In order to secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. As always, you can elect to pay less in fees and secure a higher mortgage rate. Your loan professional should be able to help you determine your breakeven point. I recommend that you get a quote with you pay all costs including one point, a quote with you paying only costs and one with you paying no costs. As a generally rule, if you are only keeping your home for 3 years or less you should go with a lower cost loan option but if you are keeping your home for long term paying more in upfront fees will save you thousands in interest over the life of your mortgage.
Should you lock or float? Tough call. I have received a few emails and comments from readers saying they wished they would have locked last week when rates were better. If retail sales surprises tomorrow and we get a few strong earnings reports, MBS could fall and fall quickly. While AQ and MG are expecting a range, they are adamant that floating is very risky. A huge benefit of locking is that you remove all risk and many lenders do offer a float down where if rates improve they will offer you a lower rate.