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Friday 3/20…TGIF!!

by Victor Burek -
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Yesterday mortgage backed securities gave back some of the gains we enjoyed on Wednesday.  Most lenders repriced for the worse yesterday, with some taking away almost a full point in discount.  Lenders rate sheets yesterday were all over the  place, with the most aggressive lenders coming out at 4.5% par and others as high as 4.875% par.  After the reprices, par rates increased by about .125%.  So far this morning it appears that the selling pressure on mbs will continue.  Hopefully all floaters took advantage of some nice looking rate sheets yesterday morning and locked especially people closing within the next couple weeks. 

 

Today we get no economic data and about the only relevant event taking place is a speech by Fed Chairman Ben Bernanke on the financial crisis at the Independent Community Bankers of America’s National Convention.  Investors will be listening to every thing he has to say as his words have the potential of moving all the markets. 

 

The sell off we had yesterday in mbs did not support the amount of reprices for the worse we received from lenders.  What appears to be happening is the same thing that happened in late December  and January when rates dropped to current levels.  Lenders came out with aggressive rate sheets, consumers and loan officers flooded lenders with locks.   Keep in mind, 2008 was a tough year on banks so they cut back on staff.  With the flood of lock commitments, they cannot handle the volume, so to slow down submissions they increase rates.  Many consumers are under the impression that rates are going to 4% or lower, but I do not see that happening anytime soon.  How could lenders handle the volume if rates went to that level?  As I said yesterday, don’t sit on the sidelines for lower rates.   Mortgage rates now are still at historic lows, take advantage of it.  Contact a mortgage professional, have them do an analysis to see if refinancing makes sense. 

 

As of time I am writing this update, no lenders have issued rate sheets.  I suspect that par 30 year fixed rate mortgage will be at 4.625% to 4.875% depending on the lender; however, on Friday’s lenders usually are quite conservative with the rates they offer.  This is due to the uncertainty of what can happen over the weekend, so I wouldn’t be surprised to see slightly higher rates offered. 

 

I will get back to you later today with an update.


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on
Again, I'll repeat an earlier comment that if the powers that be want to really push rates down then a more cost effective way to do that would be to throw a much smaller amount of money at training for mortgage UW and processors. Staffing seems to be the major issue right now that is keeping rates where they are. OK, so I'll throw liquidity into the mix too. I'm still hearing stories of lenders delaying loan funding as we get close to the settlement date. What good does an additional $750B in MBS purchases do by the FED, if the industry is not able to absorb the additional volume that implies? It seems that the system itself is the major issue now, not the market factors.
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Gary, i hear ya, but the added purchases of mbs will keep rates under 5%. hard to complain when rates are that low. If the fed wasnt buying mbs now, rates would be considerably higher. I have said this many times, if you can lock a 30 year fixed rate mortgage under 5%, how can you complain. that is incredible!!!
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Thank you Victor for all of the great advice. My wife and I are first time homebuyers and would have been lost without this site. We locked yesterday morning and could not be happier. Thanks
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having a hard time locking a sub 5% rate, 0 points in Massachusetts... excellent (795-804) credit score and 20% downpayment too. it's not a jumbo loan by the way, it's for 395k, and have 105k down (55cash, 50 gift of equity from parents, as it's a family purchase) should i just go to lendingtree.com?
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Getting too greedy about the interest rate (expecting or demanding a rate that is lower than what is realistic) is a common mistake that leads people to missing out. They hold out too long and end up floating until rates go up by .5 or more. I agree with Victor: if you see a good rate below 5%, take it and be happy. And remember, not all states are as inexpensive as Texas. Good luck everyone!
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I'm with you Gary. Even though rates are at "historic lows" there are many people waiting for that magic number that's been thrown out there. When rates do dip low as they did this week, they only last a day or so before sheer volume drives them back up. I'm sure there are plenty of folks without jobs who wouldn't mind processing some loans for a time.
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Hi Victor, I have a situation here need some help. We are closing today. The broker sent me a settlement statement yesterday which shows the closing cost is about $1000 more than he gave to me on the GFE before. Those additional $1000 costs are from new added administration fee ($550), increase title charge and some other MISC fees. Can we back out at this moment? Are we responsible for appraisal fee, underwriting fee or some other fees if we don't want go through closing? Thanks!
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pj I work for a lender in MA and from based off your info it seems like you shouldn't have any issues qualifying sub 5%. Would be happy to help!
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PJ – per you comment on going to Lendingtree.com – I am a Lending Tree partner and for a loan amount above 350,001 and your credit scores, you are better off saving the CLO fee ($875 is charged to me – which is passed on to you). Go with someone local that will not have that CLO fee… someone such as Benjamin.
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JT, great job and thanks. PJ, i am not a fan of lending tree as all they are is a lead generating company. I cannot do loans in Mass. but if you email me, i can refer you to a great mortgage professional in Mass. that can help you. vburek@866whyross.com. Carolyn, glad you agree with me and i agree to many consumers get overly greedy, a bird in hand is worth more than 2 in the bush. Lillian, it seems you might be getting taken advantage of. The admin fee is a fee that will go to the company doing your loan. Demand that they remove that fee. Sometimes some fees vary some from the original quote but $1000 is way to excessive. If you havent paid this company any money up front, than if you back out you will not be responsible for any fees except the appraisal and i would suggest that you back out if they dont lessen the fees. Troy, that is another negative of lending tree, they charge a pretty hefty fee and thanks for giving some good honest advice.
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Thanks Victor! The broker said if we back out, we need to pay some title search fee, underwriting fee in addition to appraisal fee. Is it true? Will it affect our credit score? Our current score is 740. If we go to another broker, they will check credit score one more time. Will this affect our credit score so that we cannot get the best rate? Thank you very much! BTW, do you have any broker to recommend in OK state?
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Lillian Xiang, I am not a broker - I work for a lender, but I would be happy to help with any loan questions for Oklahoma.
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Hi everyone. Thanks for the great resource. Here's my question. I'm a first-time homebuyer and have a 30 yr fixed arranged through a credit union (loan amount of 284,000). About a week and a half ago (before I found this site), I locked my rate on the loan at 5.125% with no discount points. As you know, since then, the rates have dropped. The credit union is now offering 4.875% with the same conditions and I'm able to obtain the lower rate by paying a $500 fee (which I feel is pretty reasonable, compared to the cost of paying for discount points). I calculate that I would recoup that $500 fee in about 12 months based on a lower monthly payment alone, so to obtain the lower rate makes sense. So, I'm a bit torn about whether to pull the trigger on the 0.25% lower rate or wait to see if things improve a bit before my April 1 closing date. The rates at the credit union seem to be very steady from day to day (they were 4.875% yesterday AND today, after dropping 0.25% after the FOMC statement), so I'm hopeful that even if I wait, I could at least get the 4.875% rate that's being offered today. On the other hand, I don't want to miss the opportunity to lock what is obviously a very good rate. Any opinions? Thanks!
on
Lillian, you are being lied to. You do not need to pay the title search fee, undewriting fee and if i were you i wouldnt even pay for the appraisal. But, the right thing to do would be to pay for the appraisal. No, if you back out your credit will not suffer. I would suggest that you call your broker, have him read my comments. maybe he/she will post something, but in my opinion you have found a bad broker that gives all brokers bad names. I would tell your broker that you are reporting them to HUD for changing terms of loan on you at last moment and lying to you about having to pay fees if you back out. Mat G, pay the fee and go with 4.875%. Not being rude, but dont get greedy.
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does any one has any experience with Amerisave they are offering tempting rates but there closing cost are up high
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I'm trying to decide between 4.625% at 0.7 pts and 4.5% at 1.1 pts. Would it be better to pay the extra to get the lower rate or to use that amount (0.4 pt diff) to put towards the principle?
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Cory what is the loan value, that can help you determine if you should or not.
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Actually, it looks like that extra .4% will take roughly 4.5 years to payoff. That is a long break even, but I guess if you plan on being in the house for a long time, then it is worth it.
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Just wanted to thank Victor and everybody else on this site for the insight regarding the mysterious world of mortgage rates. I just locked yesterday at 4.625% with .25 points and I decided to finally pull the trigger due to the helpful advice on this site.
on
good job KJ I agree with CPA, 4.5 years is a long break even point. even if you think you will keep home that long now, over the next 4.5 years a lot can change in your life. Go with the higher rate less costs.
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Is that really important to go LOCAL when shopping for a mortgage? Some guy with Wells Fargo giving me really a good deal but he is 3 hr drive away...
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Alex, doesnt really matter where the LO is or the bank. If the lender/broker is local they will know the local market better which could be an advantage.
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thanks Victor. Our offer just got accepted and I think on Monday I'll get to decide who am I working with. I have 4 lenders I am considering so on Monday I'll send them all email and ask them to send me their best rates for 90 days lock since my closing date May 29th. Maybe I'll float for a week or so to get down to 60 days lock? What would you suggest me to do? My case:30 years fixed, 20% down, 0 origination, 0 points, house value 255K.
on
Alex, if you are keeping this home for more than 3 years, pay at least 1 point. It will get you a lower interest rate and a lower payment and will pay for itself over the first couple years. You will have to pay a fee for sucha long lock, so you might want to consider floating for a little while. During that time, rates might move a little higher but they should come back down between now and than.
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What should be the APR reduction so it worst 1 point in my case? 3 years sounds like a good estimate for me to keep the house, but i am not sure it will be more than that... Thanks again
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Alex, if your not sure, than i would suggest take the higher rate with less costs, but ask your LO what the rate would be if you paid a point, then take the cost of the point and divide by the monthly savings. if you break even in less than the 3 yrs consider paying. Also, the point you pay will be tax deductible, so take that into account as well.
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Alex, when you get with your lenders on Monday, take into account that they don't all have the same lock periods. For my company we offer 10, 25, 40 and 55 day lock periods. So, if you ask them all for a 90 day - they may not be able to do that. Do try to compare apples to apples.
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I got 4.25 yesterday with .75 discount for 30 years at BB&T in Georgia. Thanks April and thanks you guys I learned a lot from you.
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paying a point seems to make a real difference right now, in that it used to reduce your rate only @ .25%, but depending on the lender, it can move you up to .75% now! Linda H, if you got 4.25%, that's what I'm talking about, that's awesome! Good for you!