Fence-sitters today got their first taste of a series of moderately risky events that face mortgage rates in the days ahead, Treasury auctions!
The day started with loan pricing looking basically unchanged vs. the quotes offered by lenders yesterday, but conditions deteriorated leading into the first government debt auction of the week and lenders were forced to reprice for the worse. Although the actual auction itself was strong, it failed to motivate a recovery rally in the bond market and consumer borrowing costs edged higher. Best Execution did not change though.
CURRENT MARKET: The "Best Execution" conventional 30 year fixed mortgage rate is still 4.875%. For those looking to buy down their rate to 4.75%, this quote carries higher closing costs. The upfront cost of permanently buying down your rate to 4.75% is not worth it to many applicants. We would generally only advise the permanent floatdown if you plan to hold your new mortgage for longer than the next 10 years. Ask your loan officer to run a breakeven analysis on any origination points they might require to cover permanent float down fees. On FHA/VA 30 year fixed "Best Execution" is still 4.75%. 15 year fixed conventional loans are best priced between 4.125% and 4.25%, but 4.25% is more efficient in terms of the floatdown breakeven cost. Five year ARMS are best priced at 3.625%.
PREVIOUS GUIDANCE: "Current Market" is as good as it gets for at least the next week. We are encouraged by the behavior of the bond market but remain defensive. READ MORE: LOAN PRICING STALLED
NEW GUIDANCE: "Current Market" is as good as it gets for at least the next week though. We are encouraged by the behavior of the bond market but remain defensive. If your time frame is longer term or situation not urgently requiring a mortgage, floating prospects this week are better than they were heading into last week's Employment Situation Report.
"Best Execution" is the most efficient combination of note
rate offered 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.
Important Mortgage Rate Disclaimer: The "Best Execution" loan pricing quotes shared above are generally seen as the more aggressive side of the primary mortgage market. 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.
HERE is the economic calendar for the week ahead.