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Rates as of 5/18/12:
3pm update: Mortgage rates closed slightly higher on the day with long term Treasury rates up a bit more. Stocks dropped .7%. Next week has no major economic reports due out, so the Euro situation, the stock market and Treasury debt auction results will drive the bond market.
7:30am report: Mortgage security rates are slightly higher today after breaking to new lows yesterday. Treasury rates are also higher. Stocks are up .2%, which is 8% below the 4 yr highs hit in early April. Not much news today. The Facebook IPO is getting all the headlines.(More rate outlook and background below) __________________________
30 day lock RATES with NO PPAY PENALTIES , NO POINTS on rates quoted unless otherwise noted. Lower rates available with points.
Fixed Rates
NO POINTS
| Product |
Conforming |
Jumbo |
| 30 year |
3.5% |
4.375% |
| 15 year |
2.875% |
3.75% |
| 20 year |
3.5% |
4.375% |
SUPER CONFORMING 30yrfixed 3.625% no pts., 3.5% .75pt
5/1 ARM 2.625%with no pts
Conforming above $417k to $729,750 in most counties
Adjustable Rate Mortgages (ARMs)
No points
| Product |
Conforming |
Jumbo |
|
monthly ARMs no neg amort. fully indexed |
n/a
|
n/a
|
| 3/1 |
2.375% |
3.5% |
| 5/1 |
2.5% |
3.625% |
| 7/1 |
2.75% |
4.375% |
| 10/1 |
3.75% |
4.75% |
(all rates subject to rate adds for less than excellent FICO scores, higher LTVs, loan amount adjustments and for Cash out)____________________
RATE OUTLOOK (cont.)
Mortgage rates came down sharply beginning in 11/08 as the Fed acted for the first time in history to directly lower mortgage rates by buying mortgage securities. On 12/17 and 3/18/09 rates plunged following Fed announcements of programs to buy more mortgage securities with the intent of lowering mortgage rates. Rates spiked .75% in late May and early June. But rates improved in mid 6/09 as doubts arose as to how strong the recovery would be. Mortgage rates stayed in a relatively narrow .25% range during the summer but improved in the fall to get back near the spring lows in early Oct. and in late Nov. hit new lows before moving up a bit in 12/09. On 3/24/10 rates spiked as the Fed ended their mortgage security purchase program. When the Euro debt crisis flaired in the spring rates began a steady downtrend lasting until early November 2010. Interest Rates rose 1% from early Nov to mid Dec 2010 which is among the sharper rises in recent history. In January 2011 rates ranged from 20% recovery of that spike to the best of 40% recovered, but then rates trended up in February breaking through the mid December highs on 2/8 to get to the highest rates since April 2010. Rates improved through mid March, rose until early April and then trended down to August breaking through the previous all time lows of early 11/2010. Rates hit further new lows in 9/11, There continues to be great uncertainty over the outlook for the economy and rates will swing up and down as expectations change. If you can save significantly at current rates they should not be passed up. Timing the very bottom or top of any market is nearly impossible. If you do not have a good fixed rate it makes sense for almost everyone to get one at these historical low rates. When the economy improves it could be many years before we see rates this low again especially because the actions to cure the crisis will almost certainly result in an inflation problem when the economy starts to grow again. With all the uncertainty it makes sense to have your rate locked in for as long as possible.
Long term interest rates, including mortgages, are controlled by daily trading in the bond market. The bond market actions most often preceed the Fed as the market participants are able to analyze the same data that the Fed sees. The law of supply and demand say increased borrowing from the gov't bailout of the financial system (as well as the huge budget deficit) will have an upward pressure on rates at some point when the economy recovers. We can expect that long term rates will rise before the Fed starts to raise the short term rates.
INTERMEDIATE TERM AND SHORT TERM RATES: Short term rates are driven largely by the Fed's actions. Intermediate term rates (3-7 yrs.) are in between and are more influenced by the Fed's handling of short term interest rates than the long term fixed mortgages are. Jumbo intermediate term loans are about .5% below the jumbo fixed rates because of some lenders willingness to hold the intermediate term loans in their portfolios.
The Prime Rate has been 3.25% since the 12/16/08 Fed rate cut, so prime tied HELOCs are very cheap money after having spiked to over 8% four years ago. Lender cutbacks have tightened the availability of this money significantly so it much harder to get a new HELOC and older HELOCs have had limits cut as property values drop.
The Fed cut short term interest rates by 5% from 9/07 to 12/08 when the Fed Fund rate was lowered to essentially 0%. This left the Fed using other innovative programs to further stimulate the economy. The next Fed meeting is 11/1&2/11. The Fed is not expected to begin raising rates until the recovery is well established which probably will not be until late 2013.
Inflation has picked up this year with the CPI showing consumer prices rising 3.6% in the last 12 mos. and the core rate being 1.2%. Annual core inflation (without energy and food) remains within the Fed's target of 1.0%-2.0% The Fed opinion is that inflation will moderate over the remainder of 2011 but The Fed & gov't moves to fight off another recession will be inflationary in the long run.
Borrowers with adjustable mortgages tied to Treasury & LIBOR indices and lines of credit tied to prime will continue to be helped by the low short term interest rates but beginning in 2013 will be exposed to the possibility of sharply higher rates.
Call for information on additional products. Rates are subject to change. Call to confirm current rates. |
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| 1. |
How do Federal Reserve rate changes impact mortgage rates? Answer |
| 2. |
What are closing costs? Answer |
| 3. |
What is a no closing cost loan? Answer |
| 4. |
How do I know how much house I can afford? Answer |
| 5. |
What is a pre-approval? Answer |
| 6. |
What is the difference between a fixed-rate loan and an adjustable-rate loan? Answer |
| 7. |
How is an index and margin used in an ARM? Answer |
| 8. |
How do I know which type of mortgage is best for me? Answer |
| 9. |
What does my mortgage payment include? Answer |
| 10. |
How much cash will I need to purchase a home? Answer |
| 11. |
How have fixed rates changed over the last 10 years? Answer |
| 12. |
How have fixed rates changed over the last year? Answer |
| 13. |
How is the appraised value determined?
Answer |
| 14. |
Does it cost more to use a mortage broker than to go directly to a lender? Answer |
| 15. |
What are credit scores? Answer |
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Q
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How do Federal Reserve rate changes impact mortgage rates? |
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When the Fed changes rates it immediately impacts the prime rate by the amount of the Fed change. And other adjustable rate loans change immediately also.
The long term rates are not directly impacted as the credit markets control these rates through trading activity. The long term rates are based on an expectation of what the Fed will do over the long term and on what inflation is expected to do over the long run. So changes in the short term rates do not always impact long term rates directly and sometimes the long term rates can even move in the oppositie direction from the Fed changes.
See the graph below to see that the mortgage rates do not move as much as the Fed Funds rate.
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What are closing costs? |
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Closing costs consist of fees paid to lenders, title companies, or other service providers (home inspectors, home warranties etc.. The way typical closing costs are split between buyer and seller varies by local custom (sometime being different within the same county). On a refinance the typical closing fees are about $800 of lender charged fees, $350 appraisal, $600 of escrow/title co. fees and lenders title ins. which is roughly .25% of the loan amount (it actually decreased from about .3% to less than .2% as the loan gets bigger).
There are other items that may be paid at closing that are prepayments of on-going expenses. These are referred to as "prepaids" and are not actually closing costs, but do impact the cash required at closing. These include taxes and insurance as the lenders typical require any taxes and insurance due within a few months of closing to be paid. Also prorated interest on the loan being paid off, and on the new loan from the date of closing through the end of the month. Also HOA (homeowners associatiion dues) are usally paid at closing on a purchase for the month following the close.
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What is a no closing cost loan? |
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It actually is a misnomer as there are always closing costs. It is just a question of who pays them. A "no closing cost refinance" should be where the lender pays all the lender, appraisal, escrow and title fees. The lender compensates for this by charging a higher interest rate. The add on to interest rate is more for small loans and less for larger loans because the closing costs are no proportional to the loan amount. For example the add on is about .375% for a loan of $200,000 but only .125% for a $750,000 loan. |
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How do I know how much house I can afford? |
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Generally speaking, you can purchase a home with a loan that is three or four times your annual household income. Then add whatever down payment you are able to make on top of that loan amount and you get your purchase price. However, the amount that you can borrow will also depend upon your employment history, credit history, current savings and debts, and the amount of down payment you are willing to make. You may also be able to take advantage of special loan programs for first time buyers to purchase a home with a higher value. Give us a call, and we can help you determine exactly how much you can afford. The lenders usually want the borrower to spend no more than about 45% of their gross income on their housing payment (including taxes and insurance) plus their monthly debt payments (installment loans plus required payments on revolving debt). The lender knows you have other expense such as health insurance, utilities, groceries, child care etc. but those don't usually factor into the calculation. The 45% is set to allow the 55% left over to cover these living expenses as well as your income taxes. |
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What is a pre-approval? |
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A true pre-approval is where you have documented your income, financial assets and your broker/lender has run your credit reported. A full loan application is completed by your lender and you. Your loan package is submitted to an underwriter who issues a loan commitment up to a specified loan amount and purchase price. This approval is subject to the lenders approval of a purchase contract, title report and appraisal. This pre-approval is uusally good for about 60 - 90 days but can be updated for as long as it takes for you to find a home. This is the recomended procedure as being pre-approved gives you certainty on the loan you will be able to get, gives you better negotiating power and enables you to close faster.
There are all kinds of short cuts to this process. A "prequal" is something short of this complete process. It should be an experienced lender reviewing this information/documentation and telling you what your options are. Often a prequal is misrepresented as a pre-approval. A pre-qual without the lender knowing your income, assets and credit history is worthless. Many experienced borrowers who are borrowing well within their needs can prequalify themselves. But when purchasing a home, the sellers and their agent, usually want a pre-approval letter from a broker/lender. Most time the broker letter is sufficient but cautious sellers will require proof that a lender has issued a loan commitment. |
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What is the difference between a fixed-rate loan and an adjustable-rate loan? |
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With a fixed-rate mortgage, the interest rate stays the same during the life of the loan. With an adjustable-rate mortgage (ARM), the interest changes periodically, typically in relation to an index. While the monthly payments that you make with a fixed-rate mortgage are relatively stable, payments on an ARM loan will likely change. There are advantages and disadvantages to each type of mortgage, and the best way to select a loan product is by talking to us. |
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How is an index and margin used in an ARM? |
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An index is an economic indicator that lenders use to set the interest rate for an ARM. Generally the interest rate that you pay is a combination of the index rate and a pre-specified margin. Three commonly used indices are the One-Year Treasury Bill, the Cost of Funds of the 11th District Federal Home Loan Bank (COFI), and the London InterBank Offering Rate (LIBOR). |
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How do I know which type of mortgage is best for me? |
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There is no simple formula to determine the type of mortgage that is best for you. This choice depends on a number of factors, including your current financial picture and how long you intend to keep your house. Most borrowers would prefer ultimately to have a low fixed rate mortgage. But getting an ARM makes sense when rates are high or when you do not plan to keep the loan for the long run. Tom Sammon Mortgage can help you evaluate your choices and help you make the most appropriate decision. |
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What does my mortgage payment include? |
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For most homeowners, the monthly mortgage payments include three separate parts:
Principal: Repayment on the amount borrowed. (There are interest only loans where no principal payment is required for up to the first 10 years of the loan.)
Interest: Payment to the lender for the amount borrowed
Taxes & Insurance: Monthly payments can made into a special escrow account for items like hazard insurance and property taxes. If you put down less than 10%, you usually are required to pay taxes and insurance as part of the loan payment. Many borrowers prefer to include taxes and insurance as part of hte monthly payment since it evens out housing expenses instead of paying large tax and insurance bills. Borrowers who have larger savings usually prefer to pay their taxes and insurance directly.
Homeowners dues - If your property has homeowners dues you almost always pay these directly to the management company directly as they are due. Condo ,townhouses and developments with substantial common amenities usually have monthly dues. Developments with minimal common areas often charge quarterly or even annually. |
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How much cash will I need to purchase a home? |
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The amount of cash that is necessary depends on a number of items. Generally speaking, though, you will need to supply:
Earnest Money: The deposit that is supplied when you make an offer on the house
Down Payment: A percentage of the cost of the home that is due at settlement. Zero down payment or low down payment loans are available to qualified buyers sometimes through first time homebuyer programs. These can be better options than waiting until enough money has been saved for a larger down payment, if home values are rising.
Closing Costs: Costs associated with processing paperwork to purchase or refinance a house. Plus transfer taxes requiries by local governents, inspection fees, home warranties etc. How closing costs are split between buyer and seller varies by local custom but is always negotiable.
Prepaid items: Taxes, insurance, interest and HOA dues required to be paid at closing. Sellers are reimbursed for taxes they have paid past the date of closing. The first year of homeowners insurance is paid at closing. Interest on the new loan through the end of the month is paid at closing (and then the first payment would be the first of the second month after closing (between 30 & 60 days after closing). Homeowners dues are usually paid for the first 1 to 2 months from the date of closing. |
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How have fixed rates changed over the last 10 years? |
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How have fixed rates changed over the last year? |
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<center><A style="text-decoration:none" target=0 href="http://www.escapesomewhere.com/rates.html"><font type=arial color=333366 size=3pt><b>Mortgage Interest Rates</b></font></A></center>
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<A href="http://www.escapesomewhere.com/rates.html"><img border=0 alt="Current Mortgage Rates" src="http://www.escapesomewhere.com/mort_images/current-mortgage-rates"></a>
<b><hr></b>
<center><a target=0 href="http://www.escapesomewhere.com/mortgageinterestrates.html"><font color=purple type=arial ><b>Historical Mortgage Rates</b></font></a></center><b><hr></b>
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How is the appraised value determined?
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An appraiser is required to determine value by comparing your home to the sales price the homes most similar to yours that have sold in the last six months. The appraiser is required to compare to at least three homes but will sometimes use more especially when the best three are not very similar to yours.
The comparable homes ("comps") will be as close as possible to your home in location, size and age. Homes that are listed for sale or are pending sale are considered but do not have nearly the weight of actual closed sales unless the market is moving up or down significantly - then the listings and pendings are weighted higher because they are truer reflections of the current market price then sales from several months earlier.
Each of the comparable homes will be compared with yours to determine the value of your home. The appraiser will adjust the sales price of the comp to determine the value of your home. For features where your home is better than the comparable, the appraiser will add to sales price of the comparable. For features where your home is inferior to the comparable the appraiser will subtract from the sales price of the comparable. Then the appraiser comes up with an adjusted value for each comp. Each comp usually has a different value so they suggest a range of value for your home. The appraiser comes up with a single value considering all the comparable sales but putting the most weight on the comps the appraiser considers to be the best comps.
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Does it cost more to use a mortage broker than to go directly to a lender? |
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A good mortgage broker will get a better deal for the borrower than the borrower will get going directly to a lender. There are two reasons for this. First is that lenders provide wholesale prices to mortgage brokers that are less than the retail prices borrowers get from lenders.
The idea is that the mortgage broker will charge about the same to the borrower as the lender would directly, with the difference covering the mortgage brokers costs and providing a profit for the mortgage broker. It is cheaper for the lender to get the loan from the mortgage broker because the mortgage broker does a lot of the work preparing the loan. If the mortgage broker is more efficient than the lender, as a good mortgage broker would be, then the mortgage broker can undercut the lenders'retail loan prices. The second reason is that a good mortgage broker knows which lenders have the best rates on any given program at any given time. No one lender always has the best rates. Each lender gets more aggressive when they need more volume and less aggressive when their business needs do not call for doing a lot of loans. This can vary by type of loan as some lenders are usually more aggressive in certain products and not competitive in others. |
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What are credit scores? |
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There are three major credit bureaus in the country: Experian, TransUnion, and Equifax. Usually a mortgage lender wants a credit report that has information from each of the bureaus. Each bureau provides an overall score that can be from 300 to 900 (usually 475 to 825). The score varies between bureau mostly because they have different information about you.
The score varies on how good you are with on-time payments, how much debt you have relative to your credit limits, how long of a credit history you have, the amount of debt you have obtained recently, the type of debt you have etc.
How these scores are interpreted varies but in general scores over 750 are top notch. 720 -750 is excellent. 680 - 720 is very good. 620 - 680 is okay. 580 - 620 is not so good. And below 580 is poor. Prime lenders are typically looking for 620 and above. |
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