A while back, I published a chart of interest rates that went back about 40 years. I did this in an attempt to show that the recent increase in interest rates, as well as future interest rate increases, is not a major event when put into historical context.
I want to put this into a larger perspective; how about looking at a 220-year history of interest rates? Read the rest of this entry »
People spend a lot of time looking for the perfect home. There are the countless hours spent poring over real estate listings, the weekend trips to open houses, and the days of driving with your realtor from showing to showing. However, choosing a mortgage lender or broker is often treated as an afterthought—many buyers simply go with their own bank or a broker/lender recommended by their realtor without researching competitive rates and looking for lenders who will also educate them.
This is a critical mistake. Read the rest of this entry »
FHA Loans vs Conventional loans is an important discussion. Since you can no longer drop the MIP on an FHA loan, I wanted to show a comparison between a 3.5% down payment FHA loan and a 5% down payment Conventional loan. I think it may encourage some buyers to save up a bit more to get 5% down for a Conventional loan. Read the rest of this entry »
Mortgage volume ebbs and flows, like a tsunami. Sometimes it comes rushing in and business gets heavy and underwriting turn times swell to 2 weeks from 3 days! And then the tide of business eerily rolls back out to sea, and underwriting turn times get normal again. So when you start a loan process and the loan officer tells you can easily close a loan Read the rest of this entry »
I barely know what “above par pricing” means, and I have been in the mortgage business for 25 years! I’ll see if I can explain it, and why you need to know about it. Read the rest of this entry »
Most people are not aware that Fannie Mae and Freddie Mac have a whole chart of pricing “add-ons”. Add-ons are an amount (usually expressed in points) which are added on to the “base rate” in certain situations. Each 1.00 point is 1.00% of the loan amount. Another example is that a .25 point is a .25% of the loan amount. On a $400,000 loan a .25% is $1,000.
Some examples of situations when add-ons are required: Read the rest of this entry »
APR (Annual Percentage Rate) is a poor judge of character. Annual Percentage Rate, or APR, is a legal requirement that mortgage lenders must disclose on one of their disclosures called a “Truth In Lending” statement. It is not a useful way for the consumer to measure the cost of a mortgage.
It is supposed to be a way for lenders to express their closing costs in terms of a percentage. The thinking is that consumers can simply ask lenders for the APR, and can quickly shop mortgage loan offers by analyzing this one number. But things are not that simple.
APR makes no intuitive sense to most consumers, it does not cover all the costs, and does not take into account differences in a consumers’ time horizons, tax rates and opportunity costs. A more accurate way to measure the cost of a loan is to simply take a more involved look at the interest rate and the closing costs from the lender only. To compare loan offerings between lenders the consumer need not look at title costs, per diem interest, tax escrows or state/county recording and transfer taxes. None of these aforementioned costs is dictated by the lender or is part of the loan itself.
Let’s take an example on a mortgage loan for a property in Washington, DC. Read the rest of this entry »
APR and FBI, CIA, USDA, FDIC, ATF, USPS, SEC, NASA, HUD. A lot of terms and abbreviations these days seem like alphabet soup! Interest Rate and APR (Annual Percentage Rate) are two of the most commonly confused terms in the mortgage business. Read the rest of this entry »
There are some banks deemed too big to fail, and those are the ones that have been the recipient of much taxpayer benevolence. Whether you agree with that or not (I do not, anything that fails should be allowed to fail, and someone stronger will step in to clean up the pieces), my contention is that big banks and most big institutions are simply too big to work with. Most large entities do not work well. Once you scale something up to a certain point in size, its impossible to make it function well. You can even Read the rest of this entry »
Potential homebuyers who contact me for a mortgage are now frequently asking if they should wait to buy a home. The implication is that people are now worried that housing values are going to fall, so why buy now? Isn’t it smarter to wait? Maybe, maybe not. It is understandable why everybody is asking the question, “are housing values dropping now?”
Markets are very local. Don’t assume that real estate is going to fall across the board in every community, in every town, in every city across the U.S. Read the rest of this entry »
Interest rates are becoming a hot topic lately. With interest rates shooting up approximately 1% in about a month, there is plenty to talk about. It seems that some people were only in the housing market as a result of give away mortgage rates. When I hear someone exclaim surprise when I quote a 4.5% interest rate, because they heard rates were at 3.5% six months ago, it actually shocks me that people are surprised. It is as if most people expected rates to stay down forever. Any casual student of interest rates and general economics knows that interest rates, as with any market, move up and down constantly. Read the rest of this entry »
I get a lot of excited questions based on information people see on the latest average interest rate news. This data is usually published monthly by the media, so it is a regular source of misleading data.
It is a compilation of a lot of different interest rate quotes and variables, that do not apply to everyone’s exact situation. Also, it is a national average figure, with interest rate quotes from across the country that may not apply locally, and many times also includes interest rate quotes with points. But most consumers do loans with 0 points. Hence, the numbers you see on TV or in the newspaper always looks artificially low. Read the rest of this entry »
Big banks can be slow, they may use appraisers that do not know the local marketplace, they do not communicate like a local lender does, and they may be slow to return calls and emails. Below is a note from a client who I followed up with after they chose to use a bank they banked with instead of working with me, because they banked there they thought they’d get special treatment.
From the client: Read the rest of this entry »
Big banks, boy, you have to love them. I am not sure I could pull off accepting federal bailouts, pointing the finger at others for a mess I helped to create, then giving out big bonuses to some employees, all combined with poor service at times. Read the rest of this entry »
The 10 Year Treasury Bond is at 2.56% as of last Friday. This is about the same as the last time I posted 10 Year Treasury Bond data in early January.
On 01-03-2019 the 10 Year Treasury Bond was 2.55%.
The 10 Year Treasury Bond is not a direct correlation to mortgage rates. It is simply a good to know historical information on treasury bond rates.
Below are some interesting historical numbers*:
In 2018 the average yield of the 10 Year Treasury Bond was 2.91%.
In 2017 the average yield of the 10 Year Treasury Bond was 2.33%.
In 2007 the average yield of the 10 Year Treasury Bond was 4.63%.
In 1997 the average yield of the 10 Year Treasury Bond was 6.35%.
In 1987 the average yield of the 10 Year Treasury Bond was 7.18%.
In 1977 the average yield of the 10 Year Treasury Bond was 7.42%.
Where is the 10 Year Treasury Bond headed next?
*The source for these numbers comes from: https://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart
I am going to post numbers on the 10 Year Treasury Bond on a regular basis. The 10 Year Treasury Bond is not a direct correlation to mortgage rates, but it is a good number to know.
As of 01-03-2019 the 10 Year Treasury Bond was 2.55%.
Below are some interesting numbers*:
In 2018 the average yield of the 10 Year Treasury Bond was 2.91%.
In 2017 the average yield of the 10 Year Treasury Bond was 2.33%. Read the rest of this entry »
The 10 Year Treasury Bond is at 2.73% so far today. This is slightly higher than the last time I posted 10 Year Treasury Bond data in early January.
On 01-03-2019 the 10 Year Treasury Bond was 2.55%.
The direction of the 10 Year Treasury Bond is a good gauge on Read the rest of this entry »
Both Fannie Mae and Freddie Mac changed their seasoning requirements for cash-out refinances. They are now requiring 12 months seasoning for cash-out refinances when paying off an existing mortgage. What does this mean? Read the rest of this entry »
There is nothing worse for a mortgage lender than the current cocktail party chatter going on about interest rates. It seems to be a main topic at the water cooler, over coffee, on Facebook, and at cocktail parties. Who got what rate, who got the lowest rate; rates, rates, rates. No talk about service or experience, and no talk about execution. It reminds me of the talks I hear about related to who has what car or what house, who took what vacation, etc. Interest rates are the current cocktail party chatter, and it is not good for me. Why? Read the rest of this entry »
Interest rates have come down, yes. I have already blogged here once about the current hysterical herd that seems to think that rates are dropping 1% each week. Apparently…I again need to discuss why rates are not plummeting non-stop. And likely…..will have to do so again. Read the rest of this entry »
Let’s do a quick lesson that may take us back to our school days. I want to make sure everyone knows what a commodity is, and is not.
A commodity is a good for which there is Read the rest of this entry »
A Credit Score Simulator can help with “What If” scenarios to determine what you could potentially do to raise your credit score. It can also show you what could negatively impact your credit score. It is important to see how your credit choices might affect your credit score because your credit score will impact the underwriting of your loan, your interest rate quote, and even the cost of your mortgage insurance.
Some of the various things a Credit Score Simulator can measure to see how they will impact your credit score are: Read the rest of this entry »
I am sure many people want to know where current mortgage rates are at all times, but especially after the recent stock market debacle where the DOW was down almost 1,000 points at one point in the day. Of course, the story line we are hearing is that the mistaken input of a fat fingered trader at Citi is solely responsible for the error. That story is meant for an entire other blog post, but if anyone believes there are not checks and balances in place to protect from those sorts of simple mistakes, then I have a bridge for sale. Read the rest of this entry »
I have heard hundreds of times that people think they should settle at the end of the month to save money on the closing costs. They make it sound like you will save enormous amounts of money by closing at the end of the month. Everyone knows its true. I have clients whose friends tell them this, their neighbors and workmates also tell them. So it must be true, yes? It is not true. This is an old wives’ tale. What these people are talking about is the daily interest charge, also known as per diem interest.
The actual closing costs are no more expensive if you settle early in the month than if you settle late in the month. Read the rest of this entry »
Mortgage rates did indeed go down after the Coronavirus spread and financial markets started to panic. But the Coronavirus and mortgage rates aren’t directly connected.
People considering a refinance continue to contact me for low rates, but now that rates have spiked it may no longer makes sense.
The recent mortgage rate reductions we saw may be gone for a period of time, but the rate changes are not as drastic as the media made it sound. Read the rest of this entry »
One motto I follow in life is: do not be sold, be educated. One of the favorite t-shirts that I have is an old, tattered blue t-shirt that has the words “I Need Advertising To Help Me Decide” written across the front. I love the sarcasm and the not so subtle message. It is discomforting that so many people let themselves get sold, as opposed to taking the time to learn, study, analyze and decide using proper business analytics. I see this in the mortgage world more Read the rest of this entry »
It is very common for realtors to ask a homebuyer who their mortgage loan officer is and where they are located. There is a belief that a lender, and for that matter all the service providers to a real estate transaction, needs to be very local.
Realtors assign some magical powers to a mortgage loan officer who is Read the rest of this entry »
Does The Government Control Mortgage Rates? Thinking the Federal Reserve will cut interest rates, or raise interest rates, may not be advisable. Here are some pertinent comments from an economist: Read the rest of this entry »
The Federal Reserve has no control? When it comes to interest rates, the Federal Reserve is fairly irrelevant. All it does is adjust its rates to those set by the market. If you plot the yield on T-bills against the discount rate, you will see that the former leads the latter. Despite all the rhetoric about it, the Fed has not kept rates artificially low, just as it did not make them soar in the 1970s. The market sets the rates, and the Fed follows. Read the rest of this entry »
Why do I feel like when someone calls me to talk about interest rates, they are calling multiple people, scouring the internet, and getting a lot of misinformation? I have a good friend who works at Freddie Mac (FHLMC) who I met for dinner recently. Over dinner conversation she mentioned that when FHLMC sends out their report on average interest rates. They get calls daily from homebuyers and people interested in refinancing. These people ask how to apply with FHLMC for that rate! My friend says the callers will say, “Can I get that rate from you that you guys reported, I can’t find it anywhere else!” They then have to explain that FHLMC is not a lender. FHLMC is a corporation authorized by Congress to provide a secondary market for residential mortgages. Read the rest of this entry »
Many people ask about 15 year mortgages. Some people ask about a 15 year mortgage in relation to refinancing, and they figure with lower rates maybe they can afford a 15 year loan instead of a 30 year loan. And some people inquire about a 15 year loan when buying a home, because they want to pay off debt faster. But the monthly payments are quite a bit higher on a 15 year loan, and although you can save a lot of money over the long haul, you really have to decide what you can afford, and if cash flow is more important than building equity. You do get a lower rate on a 15 year mortgage, but Read the rest of this entry »
When someone says the words: mortgage insurance, most people have a negative reaction because they think paying mortgage insurance is a waste of money. Most people, of course, always think they are qualified well enough, and should not have to pay PMI (Private Mortgage Insurance). But most people don’t realize the low down payment loan they need would not even exist without PMI, so maybe its not as evil as first imagined. Another thing that people do not realize is that there is an option to get the lender to pay for the PMI. It is called LPMI, which stands for Lender Paid Mortgage Insurance. This is available only on Read the rest of this entry »
Everyone wants to get the best deal reasonably possible when getting a mortgage. I say reasonable, because although some lending sources advertise what seem like unreal rates, most consumers are smart enough to discount what appears to be a free lunch. The reality is that even with hundreds of competitors, rates never vary by much more than 1/8% in rate. But hey, who does not want every 1/8% to be in their favor?! I do. So go for it. But here is the problem with shopping for that best 1/8% deal online: Read the rest of this entry »
Getting a loan is easy, right? You apply for the loan, you send in some paperwork, someone appraises the home, and if your credit is OK, a little bit later, you get a mortgage. Right? It should be that easy, I agree. We have the technology and desire in place to make the mortgage process easy, I believe. The problem with assuming you can shop anywhere, call anyone, and get a loan through any source is that the above is not only not true, the truth is completely the opposite. Getting a mortgage has become the most arcane, complicated, minutia filled experience ever. It is worse than going to the Department of Motor Vehicles, by far. Read the rest of this entry »
I have decided not to lock-in any loans with GMAC/Ally Financial, until I see a resolution for their current problems. Ally Financial, the former GMAC, still owes taxpayers a lot of money from the bailout we gave them! This was part of the General Motors and Chrysler bailouts, and included their financing divisions, one of which is the mortgage lending division of GM. Read the rest of this entry »
It looks like rates are edging up today, again. Here is this morning’s bond market update from MBS Online:
“MBS are down -13/32 (FNMA 30-yr 3.0 at 103.23), around 16/32 lower than yesterday at this time. Unfavorable repricing took place yesterday. Early investors may have priced at levels as high as -10/32.
Global investors have continued to shift to riskier assets today, pushing major US stock indexes to multi-year highs, and hurting bonds. Stronger than expected economic news from Europe was the main influence today. MBS prices have dropped to levels last seen in September. The Dow is up 50 points. New Home Sales will be released at 10:00 ET.” Read the rest of this entry »
It seems the big discussion in the mortgage world lately has been about interest rates. I think it is important to put the discussion into some context, and what better context than to look at interest rates historically. The chart tells the whole story. Read the rest of this entry »
When comparing mortgage lenders there are many things to consider. If you want to save time follow the below steps on how to compare mortgage lenders. Time is valuable and these six steps should help you find a good mortgage lender: Read the rest of this entry »
Anyone that reads my blog knows that in general I am not a fan of Interest Only (IO) loans. I have said before that an IO loan is like putting your mortgage on a credit card. But on a refinance it may make sense if you have already built a lot of equity, are more interested in savings than equity building, and know you are not going to live in the property forever so have no interest in getting the mortgage paid off.
I had a client tell me recently Read the rest of this entry »
What is an Interest Rate “Float Down”? It used to be that if you locked in an interest rate, you’d have a chance at a lower rate later in the transaction and prior to closing via a “float down”. A float down may, for example, allow you to initially lock-in a 6% 30 Year Fixed rate with 0 points, only to float down to a 5.5% 30 Year Fixed rate with 0 points later in the transaction if rates fall during the processing of the loan.
Many people are very focused on interest rates these days and are wondering where they are headed next and how it may affect their mortgage payment. Interest rates have been historically low for a very long time, and people are starting to fear that they may increase and have an outsized impact on the cost of purchasing a home.
You can see a chart of the long-term history of interest-rates by clicking here. This chart shows that we are definitely near the bottom of where interest-rates have been over a long period of time. On the other hand, if interest-rates start to go up does it have as much of an impact as people think? Read the rest of this entry »
Interest rates are down, do you need to refinance? Are you looking to buy a new home?
I have noticed in the past that when rates go down, they do not seem to stay down for very long. It seems they stay down for days, maybe weeks. Right now you can get a 30 year fixed-rate mortgage for somewhere around 4.75%, and you can get a 15 year fixed-rate mortgage for somewhere around 4.25%. The specifics will depend on the loan size, your credit score, the property type, property location, etc. Read the rest of this entry »
A common refrain I hear from mortgage borrowers is that interest rates are going down when they are not. I had a client insist recently that he knew rates were going down. He expected a better interest rate than what he was already locked into. But I saw that rates were exactly the same as when we had first started his transaction. After researching this some more I found that Read the rest of this entry »
Interest rates rose after the presidential election. The news from the bond market according to MBS Online was “Trump has advocated for greater spending on defense and infrastructure, and at the same time he proposes to cut taxes. These policies raise the prospects for increased deficits and inflation, neither of which are good for mortgage rates.”1
Recently rates have come back down a bit. Rates are Read the rest of this entry »
There is always another bus, right? So why not wait for the next one? I am not sure I agree. The next bus may be broken down, or out of gas, or delayed beyond a comfortable waiting period. But I am not talking about a bus, I am talking about a refinance. I hear rates are going down 1% a week, and soon banks will be giving away money for free. Do not refinance now because mortgages will be free soon if you wait. And if you wait long enough, banks will even pay you to take a mortgage. Is this true? Come on! You know my sense of sarcasm. No, it is not true. But Read the rest of this entry »
There are increases coming to mortgage interest rates due to several rule changes. One change is a proposed increase in the guarantee fees, also called the g-fees. This fee will increase 10 basis points, which is equal to 1/10th%. There are also increases coming to what I call add-ons. Add-ons are fees charged by Fannie Mae and Freddie Mac, that vary depending on credit score and down payment of each mortgage borrower. Read the rest of this entry »
The Federal Reserve has been discussing slowing down and eventually ceasing its bond purchases. This bond purchase program is, to some degree, what has been responsible for pushing interest rates down for a long time. When that bond buying party stops, interest rates will increase. The mere discussion by the Fed of ending this program has caused interest rates to rise, which are up about 0.375% to 0.5% over the last few weeks. These comments from Federal Reserve officials, as well as stronger than expected economic data, has caused investors to think that the Fed will begin to scale back its bond purchases sooner than previously expected. As a result, mortgage rates have gone higher over the last few weeks. Read the rest of this entry »
Interest rates are now up about 1% from their rock bottom lows of a few months ago. The inevitable interest rate increase from all-time lows is continuing. Investors have continued to sell stocks and bonds following the Federal Reserve meeting last week. It seems that if the economy performs as expected, then the Fed plans to taper its bond purchases later this year. Over the past few years, the Federal Reserve bond purchase program has helped mortgage rates decline to historically low levels. This occurrence has lifted the stock market. So any sign of the withdrawal of stimulus has hurt both stocks and bonds. Read the rest of this entry »
Interest rates went up this week, about 0.25% to 0.375%, depending on the type of loan. Below are some details from a bond market service I use (called MBSQuoteLine) that sends me news on the bond market, which is the biggest driver of the direction of interest rates, on why this rate increase happened.
Everybody likes to offer an opinion on where the stock market is headed next, or where interest rates are headed, among many other things. So I’ll jump into the fray and offer my opinion as well. I think Read the rest of this entry »
I hear a lot of people who apply for a mortgage complain about the inability to get a simple, timely status on their loan application. Some people don’t even get a weekly call. I think people should be able to know what is going on with their loan application whenever they want. So I created a way to do this that is easy for all. Read the rest of this entry »
I wrote an article in February 2013 discussing the low inventory environment, wondering where the sellers were, and predicting that inventory would eventually start to rise, which would put a lid or even some downward pressure on real estate prices. To read that article click here. So where are prices and inventory headed now, a few quarters later? Read the rest of this entry »
Going dark. All salespeople have experienced this, no matter how good. You educate a potential client, you spend hours and hours with them answering questions, you create a relationship, and you truly seek to help them to earn your commission. And then it happens, they go dark. No contact. No return calls. No email reply. No nothing. It is eerie. You start to wonder what you did wrong. Read the rest of this entry »
It is easy to be confused when shopping for a mortgage these days, especially a refinance. Most lenders just throw up as much stuff on the wall as they can to see what sticks. They would take 1000 loan applications in the hopes of closing on 500 of them. But where does that leave the 500 people that had their loans rejected? Is it fair to have them pay $400-$500 in application fees, and to wait 30-90 days, when it could have been determined in advance the loan was not able to be approved. Read the rest of this entry »
Confirmation bias, what is it? I would say it is the psychological thing within most of us that colors our ability to admit we are wrong. I suffer from it mostly within the realm of investing. I am never wrong when I make an investment call, but of course, I am, many times. But I cannot admit it until its too late, because I am so smart, I cannot be wrong! So I wait until I lose even more, and then Read the rest of this entry »
There was an extensive report done by a research, marketing and communications firm based in Washington, DC. The firm has more than 30 years in the field of research with deep experience in the fields of financial services, housing and technology. I want to show you the results of some of this research as it relates to the mortgage industry and how it will help Realtors and mortgage consumers better pick a mortgage lender.
Below are four major findings from the research that Realtors see as their main problem with mortgage lenders: Read the rest of this entry »
I am going to continue to post, when appropriate, updates from the service I use called MBS Quoteline, that updates me on the bond market. Remember that in general, inflationary news is bad for the bond market and interest rates, and deflationary or recessionary news is positive for the bond market and interest rates. The news for today is: Read the rest of this entry »
The 10 Year Treasury Bond was at 1.822% on January 10th 2020.
It was 1.847% as of October 28th 2019.
So you can see that rates have been fairly flat for the last 2+ months.
The 10 Year Treasury Bond is not a direct correlation to mortgage rates. It is simply good to know historical information on Treasury bond rates.
The 10 Year Treasury Bond was at 2.08% as of last Friday*. This is the lowest it has been in a long time.
QUESTION: But what does this mean for mortgage rates?
ANSWER: In general, mortgage rates are flat recently, but down over the last few months.
QUESTION: Do mortgage rates rise and fall in lockstep with the 10 Year Treasury Bond?
ANSWER: No.
QUESTION: What variables affect mortgage rate quotes.
ANSWER: Loan size, loan type, property type, credit score, down payment, debt ratios, and more.
Where are the 10 Year Treasury Bond, and more importantly mortgage rates, headed next? Check back here to see!
*The source for the 10 Year Treasury Bond quote comes from here: https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx
The 10 Year Treasury Bond was around 1.8% as of October 28th 2019.
The 10 Year Treasury Bond is not a direct correlation to mortgage rates. It is simply good to know historical information on treasury bond rates.
On August 2nd 2019 the 10 Year Treasury Bond was 1.846%.
On September 3rd 2019 the 10 Year Treasury Bond was 1.461%.
Below are some interesting historical numbers:
In 2018 the average yield of the 10 Year Treasury Bond was 2.91%.
In 2017 the average yield of the 10 Year Treasury Bond was 2.33%.
In 2007 the average yield of the 10 Year Treasury Bond was 4.63%.
In 1997 the average yield of the 10 Year Treasury Bond was 6.35%.
In 1987 the average yield of the 10 Year Treasury Bond was 7.18%.
In 1977 the average yield of the 10 Year Treasury Bond was 7.42%.
Where is the 10 Year Treasury Bond headed next? Stay tuned!
*The source for these numbers comes from:
https://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart
and
https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx
TRANSCRIPT:
Justin: We are on. Hey, Brian. This is Justin and we’re here with the Mortgage Market Minute. What do you have for me today?
Brian Martucci: Well, I think the topic of the day is probably going to be interest rates and the odd thing to me is that a lot of people do not realize that interest rates are up a little bit, not a lot, but people, when the media starts to hammer the public with the fact that rates are down, rates are down and they repeat it all the time. Read the rest of this entry »
The Good Faith Estimate (GFE) is one of the worst ways to compare lenders. I must get asked for a GFE 10 times a week, and 10 times a week I try and explain that using a GFE is the wrong way to compare lenders. Below are a few reasons why: Read the rest of this entry »
One motto of Lending Tree is, “when lenders compete, you win.” Yes, I agree. But that should be expanded to be considered even somewhat accurate. If Lending Tree were my company I’d say, “when experienced, legitimate, local lenders compete, you win.” But then , I’d have just put myself out of business. So I guess I would not say that if I owned Lending Tree or some other “lead generation” website. Read the rest of this entry »
I have had clients who always think, “Let’s get a better deal at all costs”. I had clients who applied for a refinance almost 4 months ago. Interest rates dropped for quite a bit of that time period. It seemed like once a month they were asking me for a better deal than I had originally locked them in at. Getting a better deal is fine. Steamrolling everybody in your path to pick up each 1/8% rate drop is another. Read the rest of this entry »
Many ARM loans are based on the LIBOR index (London Interbank Offered Rate), which currently stands at 0.58%. If you Google “LIBOR interest rate adjustment chart” you can find your own results to see how LIBOR has adjusted over time, or go to a chart of historical LIBOR rates by Read the rest of this entry »
Shopping for a loan is easy, kind of like window shopping. You poke your head in the window, take a look, maybe you go in the store and ask a few questions, maybe you go to another store, who knows. You are not obligated to buy from anyone, and you are going to check every source you can TO GET THE BEST PRICE. It’s all about the best price after all (he said sarcastically).
It is all about the best price, as long as you get what you wanted in the first place. And this is the problem in shopping for goods and services, people are so focused on the price, they lose of track of making sure they are going to get what they need. You have to ask a lot of questions, and be asked a lot of questions, to ensure the process will go smoothly and to ensure you will get the price being promised. If you are not being asked a lot of questions when you ask about a mortgage, something is wrong. Read the rest of this entry »
Merry Christmas and happy holidays, to all! And to all, a good mortgage lender? Yes, to all those who will interact with a mortgage lender in 2011, I wish you a “good mortgage lender.” And how do you ensure a good mortgage lender? Read the rest of this entry »
I wanted to share today’s update from MBS Online, which is the service that I use that tracks mortgage-backed securities, which is the best gauge of what the interest-rate market is doing. Here is this morning’s update:
My take on this is that this is one more slight signal that puts the bond market and mortgage-backed securities under pressure, and is another small bit of data that has helped to push up interest rates lately.
The 10 Year T-Bond has jumped from 1.83% yesterday to 1.86% this morning. For mortgage consumers this can mean a slight increase in points, but not necessarily rates, or if the negative news continues then rates may increase 1/8%.
AFTERNOON UPDATE: “MBS are down -10/32 (FNMA 30-yr 3.0 at 104.02), around 6/32 below morning levels, and at the low for the day. Unfavorable repricing took place. Stronger than expected Jobless Claims data caused MBS to move lower today. Manufacturing data in Europe and China also exceeded expectations. Leading Indicators rose 0.5%, matching the consensus. The Dow is up 50 points. The S&P 500 index crossed above the 1,500 level for the first time since December 2007. Tomorrow, New Home Sales will be released at 10:00 ET.”
Keep your eye on this blog for more news soon, but this seems to be the year that many people think that interest rates will rise. Let’s see if the news and the data cause that to happen.
Can a mortgage broker overpromise and underdeliver? I wanted to share a story about a client who used my services for his mortgage when he purchased his home three years ago. Read the rest of this entry »
Mortgage consumers need to make better choices, and not shop by price alone. Think about service, experience, execution and responsiveness.
You would think locking-in an interest rate for your mortgage is a very simple process. What is there to think about? You are given your choices, and you pick one and lock-in. Right? Not much to it?! It’s amazing what the average consumer doesn’t know, and what they should be thinking about. Read below to learn about what will be important for your next mortgage application and interest rate lock-in. Read the rest of this entry »
Mortgage rates have been on the rise. I am not sure if its part of a long term trend, or if its a short term blip. Read the rest of this entry »
Mortgage rates, why so different at different banks? Are you puzzled why Conventional mortgage rates vary so much, day to day and from bank to bank? Or do you wonder why advertised rates are different when you call a mortgage lender? Many times rates are not all that different, they are just very complicated for a bank or mortgage broker to accurately publish due to numerous variables.
Most people are not aware that Fannie Mae and Freddie Mac have a whole chart of pricing “add-ons”. Add-ons are an amount (expressed in points or rates) that are added on to the “base rate” in certain situations. Some examples of add-ons are for:
Whether a consumer is calling a bank, a mortgage banker or a mortgage broker; all mortgage providers fund their mortgages through the same sources. Because of this, mortgage rates are very close from one lender to another. Mortgage shopping is hard, however.
The purpose of “advertised” rates is to get the phone to ring. I am sure no one is surprised to find out that the ad for the cheap Mercedes is not real, and that if you want all the options, powerful engine, wheels and goodies you see on the picture in the ad, the cost goes up quite a bit. Read the rest of this entry »
Is there a free lunch, or isn’t there? My last post about mortgage shopping suggested that interest rates are only a slight bit different (1/8%) from lender to lender, and that the consumer needs to focus on performance, customer service and execution more than price. But no one does, do they? And we create our own customer service problems by seeking the lowest price, and expecting the best service. It happens with mortgages, movers, furniture, contractors…you name it. We have been creating our own service and product hassles since the dawn of time.
And the reason I have chosen to write about this again is a recent client who asked me to serve a piping hot free lunch. How you ask? Read on… Read the rest of this entry »
I frequently have people ask me for “one of those no-cost refi’s”. Some people think that mortgage lenders are so hard up for business that they are willing to lose money and simply pay the closing costs for the mortgage borrower. I don’t know of any businesses where losing money is part of the process of making money. A no-cost refi actually comes with a cost…a higher interest rate.
The reality is that a no-cost refi is one where the closing costs are built into a higher interest rate. Read the rest of this entry »
I am not an online lender, I use online tools like my website quite a bit, but I am not an online lender. So do I have a vested interest in telling people local lenders are better? Yes. Are local lenders better? Yes! Read the rest of this entry »
When you buy a new home, or refinance, it can be a nervous and exciting time. And getting excited and nervous causes people to over analyze and sometimes make poor decisions. Sometimes a client will ask for a lower rate, by paying discount points. Each discount point is 1% of the loan amount, or $1,000 per $100,000 in mortgage. It sounds great to get a rate that is a half percent lower than what you hear about in the news or see online (and shopping for rates online is not accurate, see this story for more on that), but what about the costs? Read the rest of this entry »
If you are going to be in your house long term, or forever, prepaying your mortgage is a great idea if you can afford to pay extra. The best way to save money on debt is to not have it! But many people do not realize that prepaying a fixed rate loan does not reduce the monthly payment. Prepaying a loan simply shortens the term. So prepayment builds equity faster, and ends the loan sooner, so you save money by having the loan for a lesser amount of time. Read the rest of this entry »
FHFA is the Federal Housing Finance Agency. They regulate Fannie Mae and Freddie Mac. FHFA just announced another round of Fannie Mae and Freddie Mac guaranty fee increases. These are the fees that Fannie and Freddie charge lenders to guarantee loans, and of course Fannie and Freddie have the backing of the U.S. government. Without this federal backing, Fannie and Freddie would not exist, or they certainly would not exist in the size and scope they have over decades and decades. Read the rest of this entry »
Interest rates remain low, and have been low, for years it seems like. Although a consumer may complain about getting 5.625% instead of 4.875%, rates have been in a very tight range for quite a long time. We have not had a rate with a ‘6’ in front of it for years. And I can remember when 6% was thought to be a very low rate!
Of course, the whole discussion of rates has to incorporate the price of what one is financing. Read the rest of this entry »
Interest rates are up, not a substantial amount, but enough to remind everyone that interest rates can go up as well as down. Rates are up about .25% to .375%, depending on the loan product and some other variables. While I find that insignificant, a homeowner who wanted to refinance to a Conforming 15 Year Fixed Rate at 3.125% who is now being quoted 3.5% is astonished. First, most of us forgot that rates can go up, we thought they only had one trajectory….down. Second, when the 15 Year Fixed Rate was at 3.125%, the client was hoping for 2.875%! And if rates got to 2.875%, people would hope for a little more. The financial psyche of we humans is fascinating, the deals we get are never good enough! We always want more. Read the rest of this entry »
Rates have dropped. Rates are great. Rates are very low. All true. But I have seen this show so many times before, I know how the script goes each time. Read the rest of this entry »
Should I Buy Now And Avoid Higher Interest Rates?
This is a common question I get. Potential home buyers will worry that rates are going to spike, after all, “how long can they stay this low,” goes the logic. So some buyers assume they should buy now, at any price, and avoid a future rate increase. I am not sure how long rates can stay low, they have been low for almost two decades in Japan! But, I thought for fun, we’d look at some different numbers. Keep in mind the below are based off of broad assumptions of my own: Read the rest of this entry »
Hello John.
Hello Doug.
Let’s talk about interest rates.
Why would we do that? I just bumped into you on the street and I am on my way to work.
You are not on your way to work. We are stick people, in a skit, on some guy’s website. We only exist because of his imagination. So let’s talk about mortgage rates.
Okey dokey.
So here is why interest rates will go up. First, our deficit is on par with Greece, even worse when you consider our unfunded entitlement mandates, which are ludicrous. When the world figures out what an economic mess we are in, they’ll demand higher rates to lend us money. Second, interest rates have only been lower than they are now a few other times in 220 years of recorded interest rate history. Do I need to go on?
Please do, smart stick man. Read the rest of this entry »
Thanks Anyway, I Got A Really Good Deal Elsewhere. Ever heard that? But never assume the person you are talking to has your best interests in mind. Always check with trusted sources, experienced sources, and always ask a lot of questions. And…eat all your vegetables, wear clean underwear, and look both ways before you cross the street. Now you are all set with good advice for life. So what is my point to all this? Read the rest of this entry »
Often a client will start a mortgage loan conversation with, “I need to get the best rates.” And that often confuses me. What does the “best rates” mean? Does that mean you won’t work with a lender who doesn’t have the very lowest interest rate on the day you are ready to lock-in an interest rate? Does it mean you won’t give any consideration to experience, execution, responsiveness and delivery?
Would most people work with a mortgage lender willing to lose money? Read the rest of this entry »
Do the fattest pigs get slaughtered first? There seems to be an epidemic of greed amongst today’s mortgage consumer. I am going to try and outline why it is not a birthright to get a lower interest rate if you have locked into an interest rate, and then rates drop a little during your transaction. Read the rest of this entry »
The Federal Reserve Controls Mortgage Rates? NO IT DOES NOT! There are many conspiracy theorists out there that think the Federal Reserve controls interest rates, and a lot of other things. As much as I dislike the Federal Reserve, for being arrogant enough to think Read the rest of this entry »
It’s that time again, the time when people seem to think a government edict can control a massive market. I have gotten dozens of calls and emails that go something like this:
“I hear Ben Bernanke is pushing rates down again.”
“I hear the government is pushing rates down.”
“I hear rates just dropped yesterday.”
The government does not control interest rates, unemployment, economic growth, etc. Read the rest of this entry »
Below is a copy of some data I received from a bond market data service I use. It reports on bond market news several times daily. It helps me get a gauge on which way interest rates may go for the day and in general. I wanted to paste a recent email they sent me, and in parentheses and in CAPS give you my interpretation. Below is the data with my comments. Read the rest of this entry »
The media causes hysteria. It is what they are paid to do. As a newsperson you have to make something sound alarming, even if it is not, to attract eyeballs, to sell ad space. This is positively ridiculous, but I guess somehow the bills have to get paid, and in the news world, it is with ads and marketing. But it would be nice if consumers remembered this, and took a harder look at some news reports and applied a little logic. Below is a perfect example of something the media typically makes a mountain out of, when its barely a mole hill. Below is an example of an article that goes beyond the pale. Read the rest of this entry »
Actually, the refinance boom is indeed over; however, there are a fair amount of people that still need to refinance. For example, I know of many people who have excellent interest rates on a 15-Year fixed rate mortgage because they thought they would be in their home forever and wanted to get the mortgage paid off over a shorter term, but now have suffered a job setback or some other sort of financial blow, and need to revert to a 30-Year mortgage to reduce the monthly payment. Let me give Read the rest of this entry »
Actually, the refinance boom is indeed over; however, there are a fair amount of people that still need to refinance. For example, I know of many people who have excellent interest rates on their 30-Year fixed rate mortgages, and plan to be in their home for a long time or possibly forever. These people should consider giving up their low 30-Year fixed rate, and get a still quite low 15-Year fixed rate, and save a small fortune over time. Let me give Read the rest of this entry »
Actually, the refinance boom is over; however, there are a fair amount of people that still need to refinance. The problem is that the people that have not refinanced when rates were low simply don’t realize that they should still refinance. The people that obviously needed to refinance have already refinanced, in some cases multiple times. There are many people left that can refinance. For example, Read the rest of this entry »
Actually, the refinance boom is indeed over; however, there are a fair amount of people that still need to refinance. For example, I know of many people who have decided to move sooner than they imagined. I hear of consumers who thought that they would live in their homes for the long haul, but then due to circumstances that were a surprise to them, they have now decided to leave in the next few years. Let me give Read the rest of this entry »
Actually, the refinance boom is indeed over; however, there are a fair amount of people that still need to refinance. There are a stunning amount of home equity lines (HELOCs) outstanding and most people will need to refinance those. Most HELOCs were set up so that the first ten years of the loan only require interest only payments and no principal is due. Then, in year 11, the principal would start to amortize, and it amortizes over 20 years, not 30. This is a problem because Read the rest of this entry »
Rates have been inching up with the strength in the stock market. A strong stock market means people pull money out of the bond market which creates a weaker bond market, and a weaker bond market means bond yields have to go up to keep demand up in the bond market.
So interest rates have been under pressure Read the rest of this entry »
Rates appear to be going down forever. There is no end to how low they can go, is there? Of course there is. And I find consumers have gotten used to not only low rates, but the fact that they will keep dropping. So they procrastinate and put off refinancing because rates will be lower tomorrow. But they may not. Rates can only go so low, we are at the lowest point for rates in our country. But the weak economy not only produces low rates, it produces doubt and fear. There will also be a point where debt issuers will wonder if they’ll be repaid, and they will slow down on debt issuance, which will push rates up. Consumers act as if there is an endless stream of people and institutions who will lend them money, there is not. And Read the rest of this entry »
Have you ever not thought ahead, and then found yourself marooned? I found myself thinking of this as a friend of mine was complaining about a roof leak he had that was causing massive damage to his bedroom. Not only Read the rest of this entry »
It may seem odd that someone in the mortgage business wants to discuss how to help consumers find the best mortgage lenders. People search for mortgage providers every day without the benefit of professional help. So, I figured why not help people whether they find their way to me or someone else? Below I’ve listed the most important mortgage questions that you need to ask before you apply for a mortgage loan. Read the rest of this entry »
Have you ever found yourself sneaking a grape or a cherry tomato at the grocery store, before you buy? You just want to get a taste before you buy the whole bunch, right? Who doesn’t like to try before you buy? Maybe that is OK for fruit, but not for service providers. It’s a lesson some people need to learn. Some people need to learn to “shop” and then “decide”, instead of “decide” and then “shop”. Read the rest of this entry »
Unexpected strength in the labor market was reported on Friday March 8th. The good economic news seemed to cause stocks to rise to record levels, but this alleged good news also pushed mortgage rates higher last Friday.
It was forecast that there would be 170,000 jobs added in February of this year. Since the economy added 236,000 jobs in February and the unemployment rate declined from 7.9% to 7.7%. This is “alleged good news” because the unemployment numbers do not take into account the number of people who have given up looking for jobs. If those people see this alleged improving economy and start looking for jobs again as a result, and they should get reported in the unemployment numbers again, then unemployment would actually be much, much higher. Read the rest of this entry »
With a VA loan, the United States Department of Veterans Affairs requires that the closing costs on a VA refinance be recouped in 36 months or less. If the recoupment period is over 36 months the loan will be rejected.
In other words, the refinance closing costs divided by the monthly savings has to be 36 or less, signifying the number of months in the recoupment period.
For example, if the closing costs on a VA refinance are $3,000 and the monthly savings on the refinance are $400 a month, the recoupment period is 7.5 months because $3,000 divided by $400 a month in savings = 7.5 (well within 36 months). Read the rest of this entry »
I have had numerous clients mention recently that they may wait to buy because they want to save for a larger down payment to have a 20% down payment and avoid mortgage insurance. While it is laudable to want to have a nice chunk of down payment, waiting may not pay off. Some think mortgage insurance is a waste of money, and that they should avoid it at all costs. Again, this is commendable, but maybe not worth waiting for. I’ll show some numbers to explain further. Read the rest of this entry »
So the debt ceiling is all fixed? Too bad. What else will generate so much hyperbole from our politicians? There were stories of terrorism, global disaster, and economic meltdown. My favorite was this one from Nancy Pelosi who insisted the debt limit be raised massively, “We’re trying to save life on this planet as we know it today.” Rep. Michelle Bachmann worried that raising the debt limit at all would be “like saying we embrace being Greece.” It was fun to watch. Rep. Maxine Waters said the final compromise bill “may be the single-worst piece of policy to ever come out of this institution.” Maxine needs to brush up on her history, this comes nowhere close.
Read the rest of this entry »
Often times a Realtor will suggest to a homebuyer that they use the real estate company’s “in-house” lender. Realtors don’t usually push these lenders on their buyers, but they are definitely suggested many times. Every wonder why? It is important to know how these lenders are structured, and how they operate. Read the rest of this entry »
This a story about an odd storm called a derecho that blew through the Washington DC area in late June, and storm damage, and mortgages. I know it is hard to imagine what mortgages have to do with an odd storm called a derecho. A derecho is defined as a widespread, long-lived, straight-line windstorm that is associated with a fast-moving band of severe thunderstorms. The one that blew through the Washington DC Metro area was severe and caused lengthy power outages, and damages to homes, mostly from falling trees. When there is damage to a home, a mortgage lender will Read the rest of this entry »
It seems the general consensus is that interest rates are going to drop “because of some Federal program” or, “because the Feds are going to make them go down to boost the economy.” It seems we have more believers in and fans of central planning than I ever imagined. Let’s make one thing clear, interest rates in the long run, are controlled by the marketplace. The Feds cannot decree 3% rates for the next 5 years while we work through this economic mess. Even the Feds ultimately cannot control the marketplace. However, the Feds can impact interest rates in the short run with monetary policy decisions, and the purchase of mortgage backed securities. Ultimately the marketplace sets interest rates after taking into account inflation and deflation, government monetary policy, supply of and demand for funds, and future economic expectations.
It has also recently been discussed that the cost of funds is much higher for lenders, and the availability of credit to then turn around and extend to the public is diminishing. Hence, it is said that it is hard for banks to drop rates, regardless of what the Feds do, in light of less available and more costly sources of funds. Read the rest of this entry »
Are we really that gullible to believe the old saw that someone else can price a product or service cheaper than everyone else? Apparently so, it is a gimmick that has been working for centuries. But if you really take a hard look, the lowest price is not always the lowest price. Read the rest of this entry »
Just when everyone thought rates were on a straight trend line pointing down! A few days ago, on Friday, December 4, 2009, there was a fairly bullish jobs report. Bond yields jumped up, hence, interest rates rose a bit. For a few days, I was locking-in clients at 4.75% with zero points on a 30 year fixed-rate conforming loan. A conforming loan is a loan that is equal to $417,000 or less. Read the rest of this entry »
It seems we are doomed to repeat our mistakes. Mankind has been jumping over bushels of hundred dollar bills to reach the quarter in the corner, since the dawn of currency. I have a number of new stories every week, of consumers who look so very hard for the best deal, they overlook the fact that they may be dealing with a disreputable provider, or may not get what they expect, or may be getting a promise that won’t be kept, or even worse; Read the rest of this entry »
Should you work with an individual Loan Officer or a Loan Officer team? This discussion will stir up some controversy. I will likely get some angry comments as well as some supportive comments. Keep it classy, and let’s discuss! Read the rest of this entry »
It never ceases to amaze me how people treat the most expensive transaction that they will ever do in life as a commodity. Would you get surgery at McDonald’s if they got into the health care business because it was the cheapest place to get it? Or would you talk to numerous different doctors based on experience, referrals, track record, and interaction with their staff and systems? I know as you read this blog you would say the answer is that you’d go with Read the rest of this entry »
