It's been about a month since the last Employment Situation Report was released. What we had to say about it then is pretty much the same thing we have to say about it now. The only real difference is mortgage rates were closer the middle of a tight range heading into the last Jobs report whereas this time, they're at their worst levels since mid-December. Most of that pain has played out over the past two days...
On conventional 30 year fixed loans Best Execution has risen to 5.00%. FHA/VA 30 year fixed home loans are now best priced at 4.875%. If you're shopping for a 15 year fixed mortgage rate, the sweet spot is 4.25%. On 5-year ARMs, very well qualified borrowers are still being quoted rates as low as 3.50%.
Plain and Simple: this is the first time since mid-December that the Best Execution 30 year fixed mortgage rate has not been 4.875%.
Important Mortgage Rate Disclaimer: Loan originators will only be able to offer these rates on conforming loan amounts to very well-qualified borrowers who have a middle FICO score over 740 and enough equity in their home to qualify for a refinance or a large enough savings to cover their down payment and closing costs. If the terms of your loan trigger any risk-based loan level pricing adjustments (LLPAs), your rate quote will be higher. If you do not fall into the "perfect borrower" category, make sure you ask your loan originator for an explanation of the characteristics that make your loan more expensive. "No point" loan doesn't mean "no cost" loan. The best 30 year fixed conventional/FHA/VA mortgage rates still include closing costs such as: third party fees + title charges + transfer and recording. Don't forget the intense fiscal frisking that comes along with the underwriting process
"Bext Execution" is the most efficient combination of note rate and points paid at closing. This note rate is determined based on the time it takes to recover the points you paid at closing (discount) vs. the monthly savings of permanently buying down your mortgage rate by 0.125%. When deciding on whether or not to pay points, the borrower must have an idea of how long they intend to keep their mortgage. For more info, ask you originator to explain the findings of their "breakeven analysis" on your permanent rate buydown costs.
As far as how that might affect your strategy will be up to you. The most important thing to understand is that if the report is very strong, then rates can get much worse, very very fast. We're talking 5.25% "best execution" in a matter of days.
Because so much of it still applies so well, here's what we wrote last month.
If you are currently
being quoted a rate that would reduce your monthly loan payment (enough
to be worth the hassle of refinancing), the intermediate term direction
that mortgage rates take is largely dependent on this jobs report and
revisions to the previous data.
Floating into and through this economic data release is a high risk event. Which means the best execution 30 year fixed mortgage rate could move 0.25% to 0.375% higher.
What MUST be considered BEFORE one thinks about capitalizing on a rates recovery?
1. WHAT DO YOU NEED? Rates might not recover as much as you want/need.
2. WHEN DO YOU NEED IT BY? Rates might not recover as fast as you want/need.
3. HOW DO YOU HANDLE STRESS? Are you ready for MORE VOLATILITY in the bond market.
Rates are at their worst levels since mid-December. This happened because the bond market is expecting a strong jobs report tomorrow. If mortgage rates do bounce back tomorrow, we are still facing an uphill battle and there's no guarantee borrowing costs would continue to improve. If they go worse, it's possible they'd get way worse very very fast!