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AOT, HELOC, Fee Collection, Bidding Tools; Conforming News; STRATMOR’s Ops Workshop; NYCB and Mortgage Prices

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AOT, HELOC, Fee Collection, Bidding Tools; Conforming News; STRATMOR’s Ops Workshop; NYCB and Mortgage Prices

By:
Rob Chrisman

Thu, Feb 8 2024, 11:17 AM

Economists have their favorite indices to measure the health of the economy. GDP, if men are buying underwear, CPI, RV shipments, GDP, plastic surgery appointments, PCE, hemlines… tomorrow on The Mortgage Collaborative’s Rundown Skylar Olsen, the Chief Economist of Zillow, will discuss some of this, and more, for 30-45 minutes starting at noon PT, 3PM ET, in “The Rundown”. Meanwhile, lenders are shifting the focus from things they can’t change to things they can: changing regional managers comp plans to incorporate profits instead of volume. Or honing marketing systems now, not when rates drop further and opening up refi opportunities. Or shifting to paying less for a refi and putting the difference into rate sheet pricing. And who’s buying the properties we’re lending on? Women. Okay, that was a bold generalization, but still… (Today’s Commentary podcast can be found here and this week’s is sponsored by Vesta, the new, modern Loan Origination System (LOS) which helps lenders reduce their costs to originate and improve their ability to integrate with new technologies in the ecosystem. Hear an interview with Ally Home’s Glenn Brunker on what’s happening in the housing market and what to expect going into spring homebuying season.)

Lender and Broker Software, Products, and Services

Matic, a digital home insurance platform built for the mortgage industry, recently announced an exclusive partnership with PRMG to extend their marketplace of over 40 A-Rated carriers into PRMG customer offerings. PRMG joins over 100 mortgage lenders, servicers and banks, representing 20 percent of home loans processed in the U.S., that partner with Matic to integrate the insurance shopping experience into the homeownership lifecycle. Now more than ever, mortgage leaders are turning to Matic to help them offer value to customers, generate revenue, and reduce costs in a tough housing market. Mortgage leaders, don’t miss out: book a demo with Matic to discover how to add an ancillary revenue stream that removes friction from the insurance process and keeps customers within your existing systems. And if you’re attending MBA’s Servicing Solutions Conference in two weeks, stop by booth 806 to learn more! Book a demo with Matic.

Only 60 days since launch and already 150+ mortgage originators have signed up to receive daily mandatory bids from MAXEX on bulk pools of Agency-eligible non-owner occupied (NOO) and second home loans. Moreover, we’re currently winning more than 10 percent of the loans bid! Why? Because our unique loan exchange model provides access to competitive pricing from five leading institutional buyers, allows you to underwrite to agency guidelines, and helps you avoid costly Agency LLPAs—all within a single contract and through a single, standardized clearinghouse. This seamlessly integrates with your existing bulk trading process. Visit here to learn more.

We live in a world of autopay, Apple Pay, Venmo, Uber Eats… the list goes on. If borrowers can pay for a pizza online, why are we still asking them to share their credit card info over the phone? Get with the times and collect upfront fees via text with Fee Chaser by LenderLogix.

TPO Products for Broker and Correspondent

“Button Finance is a leading home equity lender specializing in HELOCs and Closed-End Seconds, offering lucrative opportunities for our partners. Correspondent partners can earn 7.85 percent of the loan balance, while brokers can make 5 percent. Additionally, we offer an attractive 3.5 percent Lender Paid Compensation on Texas 50a6 loans. Our services extend to lending against investment properties for brokers, ensuring a broad spectrum of lending solutions. With competitive 8 percent note rates on Closed-End Seconds and no appraisals up to a $250k loan balance, Button Finance is your go-to partner for all home equity lending needs. Email us for more information.”

Eighty percent of homeowners have first mortgage rates less than 4 percent. However, they are sitting on over $10 trillion of tappable equity. HELOC originations provide an outstanding opportunity for lenders and their LOs. Every homeowner receives HELOC solicitations. If it’s not from YOU, then WHO? Depending on YOUR borrowers, this may be the ideal time for them to make home improvements or pay off credit card debt. Or it may be the right time for that dream vacation. NFTYDoor, a division of Homebridge, is a proprietary digital HELOC platform that provides on-demand access to YOUR borrower’s equity. Customers want an experience that is simple and fast, and through NFTYDoor, HELOCs can close in a few days, not weeks or months. Embrace the “Customer for Life” strategy with NFTYDoor’s platform that is 100 percent branded to you. Stay in front of your customers and recapture future business. Contact NFTYDoor today.

STRATMOR and Operations

Forecasters are predicting modest growth in new and existing home sales in 2024, which means we can all look ahead with cautious optimism. Now’s the time to review your operations and prepare for this modest shift back toward normalcy. Senior Operations Executives: STRATMOR Group is hosting its virtual Operations Workshop next week, February 14-16, to help you do just that. Interact with STRATMOR advisors and your peer lenders to discuss improving operational efficiency, overcoming recent challenges and pain points, and current trends in mortgage operations. Contact STRATMOR Group to learn more and sign up.

Conventional Conforming News

The Federal Housing Finance Agency’s 2024 scorecard for the government-sponsored enterprises included a new provision for representations and warranties. “Explore opportunities to harmonize the enterprises’ processes supporting the single-family selling representations and warranties framework, including defect identification, remedies and repurchase alternatives,” the scorecard states.

Fannie Mae’s (FNMA/OTCQB) December 2023 Monthly Summary is now available and contains information about Fannie Mae’s monthly and year-to-date activities for our gross mortgage portfolio, mortgage-backed securities and other guarantees, interest rate risk measures, and serious delinquency rates. There’s also Fannie’s Home Purchase Sentiment Index® (HPSI) which increased to its highest level since March 2022, due primarily to increased consumer confidence in job security and another significant jump in the share of consumers expecting mortgage rates to decrease. An all-time survey-high 36 percent of respondents indicated that they expect mortgage rates to go down in the next 12 months, while 28 percent expect them to go up, and 35 percent expect rates to remain the same. (Seems pretty even to me.)

Fannie Mae is updating the Uniform Loan Delivery Dataset (ULDD) to provide further guidance on implementation and mandate dates associated with the data enhancements included in the ULDD Phase 5 specification published on Sept. 12, 2023. Review the announcement for an overview on the implementation and mandate dates associated with business-critical and UAD 3.6 alignment data enhancements for the Phase 5 data requirements.

Pennymac is aligning with Freddie Mac Bulletin 2023-19, announcing updates to their rental income requirements. The updates are effective with loan deliveries on or after 03/15/2024. Details are available in Pennymac Correspondent Announcement 24-06.

National MI announced updates to the TrueGuide which include the following changes and clarifications: ​​​​​AUS Loans Automated Tools have been updated as follows: Fannie Mae Appraisal Waiver has been updated to reflect the name change to “Value Acceptance.” Fannie Mae Income Calculator for self-employment income has been added as an approved income and asset tool. Non-AUS Loans have been updated as follows: Jumbo and Medical Professional Program loan limit increases. Verbal Verification of Employment updated to align with the GSEs’ requirements. Underwriting Guidelines detailing these changes and clarifications will be posted to nationalmi.com in the near future.

AmeriHome Mortgage Announcement 20240111-CL summarizes previously published changes made during January, additional changes made with this announcement, and recent Agency and regulatory news.

Citizens Correspondent National Bulletin 2024-02 includes information on Value Acceptance + Property Data – DU (Delegated Transactions only). Effective February 1st, Conventional Conforming Updates and Disaster Tax Filing Relief. See the bulletin for additional information and all lock, delivery, and purchase by dates, if required.

Capital Markets

Need a crash course in Assignment of Trade (AOT) executions? In this blog post, Assignment of Trade Executions 101, MCT experts delve into the process of AOT executions, the impact of bid tape AOT on to-be-announced (TBA) positions, and how automation is moving the industry forward. The blog also reviews the cost savings associated with bid tape AOT executions and the MCT Marketplace technology used to complete these transactions. To learn more about MCT Marketplace, view the recent video with MCT’s CEO & President, Curtis Richins. In the video, Mr. Richins reviews key features of MCT Marketplace, opportunities within the platform for buyers and sellers, and a roadmap for the future.

Even with all the selling in the bond markets last Friday after January’s payrolls data came in much stronger than expected, yields have merely moved back to where they had been for most of the year so far. Most security prices are determined by supply and demand, and yesterday witnessed a strong sale of 10-year Treasuries at the record $42 billion 10-year Treasury auction.

But bonds barely budged! Sentiment was dominated by fears surrounding NY Community Bank. Do you remember when the spreads between Treasury securities and MBS “blew out” last March with the banks having to sell MBS? We may see that again with the NYCB possibly selling part or all of Flagstar’s billions in mortgage holdings. In news of interest to loan originators, FNMA’s Home Purchase Sentiment Index recorded another impressive gain for the second straight month to post the highest level since March 2022.

Today’s calendar kicked off with weekly jobless claims (218k, about as expected, 1.871 million continuing claims… the job market continues to be strong). Later are wholesale inventories and sales for December, several Treasury auctions that will be headlined by $25 billion 30-year bonds, Freddie Mac’s Primary Mortgage Market Survey, and remarks from Richmond Fed President Barkin. We begin the day with Agency MBS prices about .125-.250 worse, the 10-year yielding 4.13 after closing yesterday at 4.15 percent, and the 2-year is at 4.44.

Jobs and Transitions

“Direct nationwide lender Kwik Mortgage, based out of Parsippany NJ, is hiring Distributed Retail Sales. We have outstanding support, and our platform is built for you, featuring Blend, Encompass, HubSpot, Loan Vision and Optimal Blue! We offer a full suite of correspondent buyers inclusive of Fannie Mae and Freddie is on the table for 2024! From FHA and VA to Non-QM we have it all! We have a very flat leadership structure which means customers are not paying for more and getting less! We invest in our people and our process, and we have 27 years of company owned and operated success! We are always competitively priced. Don’t worry about fulfillment execution we owned and operated one of the best loan fulfillment for pay businesses in the country, Equilibrium Mortgage Solutions! Contact Paul Campbell, EVP of Lending, (760-774-7704), Paul Campbell, LinkedIn! We are connected: a Fannie Mae diverse minority advisory board lender, The Mortgage Collaborative lender board member, MBA Policy, Servicing and Compliance committee participant! A Depository DE&I advisory board member! Get Kwik come join us! NY, NJ, PA, CT, MA, RI originators welcome.”

Stronghill Capital, LLC, an Austin, TX-based Wholesale and Correspondent lender, is NOW HIRING across the country! If you’re a relationship-focused Account Executive with experience in Non-QM and Investor Financing, including multi-family and mixed-use properties, we’d love to speak with you! Stronghill’s Account Executives enjoy open territories, multi-channel opportunities to work with clients as correspondents or brokers, and consistent communication and collaboration with the Executive Leadership team. If you’re looking to join a rapidly-growing, dynamic organization with a focused commitment to growth and expansion in Non-QM, reach out to our SVP of Sales, Matt Brammer at 440.382.3183 to learn more.

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Source: mortgagenewsdaily.com

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When you’re buying a house, you have more to consider than just which property to purchase. You’ll need to understand the mortgage process, including if and when you should apply for a rate lock.

Let’s explore what a mortgage rate lock is, how it can protect you from fluctuating interest rates and how Pennymac’s mortgage rate lock program offers added benefits to homebuyers.

What Is a Mortgage Rate Lock?

A rate lock, also called a locked-in rate and rate protection, is a guarantee from a mortgage lender to give you a set interest rate (often the current market rate) when you apply for a mortgage. It guarantees a specific interest rate for a period of time, allowing you to close on a property without worrying about the mortgage rate changing.

When you lock in an interest rate, you are locking in pricing for that day. For example, if you lock in a 30-year fixed rate but then decide you want to do a 20-year term instead, you would still be able to take advantage of the interest for the day you locked.

If you don’t secure your interest rate through a rate lock, increasing rates might necessitate a larger down payment or require you to pay points at closing to stay within your desired monthly mortgage payment budget.

What Is a Float-Down Loan Option?

While locking a rate can protect you from future rate increases during the underwriting and loan processing period, there is a chance the rate could also drop. A mortgage rate lock float-down enables you to lock in a rate during the underwriting period and have it reduced if market interest rates fall.

To protect yourself, whether rates go up or down, consider a lender that offers a rate lock with a float-down option. For example, Pennymac’s Lock & Shop program allows Pennymac customers to lock their rate for up to 90 days. It differs from a typical rate lock since you lock in the rate while shopping for a house—with the intention that you’ll find one in the next 60 days or so—and lock the rate once you go under contract.

A BuyerReady Certification is Pennymac’s unique loan certification process that can tell you the mortgage amount you could qualify for. It’s a great first step in your home-buying journey. Not only will you get as close to a mortgage as possible without actually finalizing it, but it qualifies you for Lock & Shop, which provides additional security and flexibility as you go through the underwriting process. You can lock in your rate before you get into contract with a seller, potentially saving you thousands of dollars in the lifetime cost of your new mortgage.

When Should You Lock Your Mortgage Rate?

Most people lock their mortgage rate after they’ve signed a purchase agreement for their home or when they begin the refinance process. But ultimately, it’s difficult to advise when you should lock your mortgage rate as rates can fluctuate on an hourly and daily basis, and the mortgage rate you’ll receive depends on your credit score and other factors.

Nobody can predict when mortgage rates will rise or fall. The best you can do to ensure a competitive rate is to research the recent history of mortgage rates in your area, determine if mortgage rates are rising or falling and lock in the rate as soon as you feel ready.

Don’t hesitate to ask a Loan Expert for advice — they are a great information resource.

Why Mortgage Rates Fluctuate

Numerous economic factors contribute to mortgage rate fluctuation, such as inflation, the rate of economic growth, housing market conditions and the Federal Reserve monetary policy. The Federal Reserve is responsible for determining federal funds rates. This target interest rate helps determine how expensive it is for banks to borrow money from other banks. The higher the federal funds rate, the more banks must charge in mortgage rates to recoup their expenses.

How Long Is a Mortgage Rate Lock Good For?

Rate locks last for a set period of time. Generally, you have the option of a 30-, 45- or 60-day period. Extended periods are possible — with Pennymac Lock & Shop, you have up to 90 days.* Once your rate lock period expires, the originally agreed-upon interest rate is no longer guaranteed. You’ll need a rate lock extension to maintain it, but this comes at an additional cost that increases with the length of the extension. However, Pennymac will cover the extension cost if the lock expires due to a delay on our end.

Considerations on Selecting the Right Rate Lock Time Period

When deciding how long to lock your rate, it is important to select a duration long enough to cover your close of escrow date. It might be a good idea to ask your lender about their average times to help ensure you’ve picked a period of adequate length.

The Benefits of a Mortgage Rate Lock

The paperwork and processing involved when buying or refinancing a house often takes several weeks. Because interest rates can fluctuate daily, the rate available when you start the mortgage process will probably be a little different than the rate available when your mortgage is finalized.

Since mortgages involve large amounts of money and are paid over extended periods of time, even slight fluctuations can quickly amount to thousands of dollars. By locking in your mortgage rate, you protect yourself from the possibility of paying higher amounts should mortgage rates rise.

The Downsides of a Mortgage Rate Lock

While a rate lock has many advantages, it also comes with a risk. The most significant is that if interest rates fall during the lock period, you can’t take advantage of the lower rate. On the flip side, if interest rates rise, they are shielded from a higher rate environment.

To ensure that you’ll continue to benefit from favorable market conditions even after committing to a rate, consider using a lender that offers a float-down option on purchase loans, such as Pennymac’s Lock and Shop.

The Process of Locking in Your Mortgage Rate

The actual rate-locking method will vary by lender, so make sure you talk to your loan officer about how to do a lock. If your loan officer doesn’t mention a rate lock, you should ask for one when you’re ready to lock. While you have hopefully already done your homework when selecting your lender and locking in your rate, now is a good time to check about available rate lock periods and whether there is a rate lock fee. At Pennymac, you can start the Lock & Shop rate lock process with float-down provision after becoming BuyerReady Certified.

It’s also important to know that rate lock terms can be impacted if the information provided on your application changes, such as the property appraisal, your credit score, income or employment or if there is a revision to the loan itself, such as length or type of mortgage.

Is a Rate Lock Right for Me?

Rates are constantly fluctuating, similar to how the stock market moves up and down. The rate fluctuations that can happen during the loan underwriting and processing time period may seem small, but those changes can be enough to cost you or save you thousands of dollars over the life of your mortgage. Obtaining a mortgage rate lock with a float-down option provides peace of mind. If rates increase, you’ll be protected; if they decrease, you can take advantage of the lower rate.

Pennymac can help you prepare for your home-buying journey with confidence. Get BuyerReady Certified to understand how much you can borrow, then protect yourself from future rate increases before you get into contract with Lock & Shop. Have more questions about rate locks or mortgages? Contact a Pennymac Loan Expert today.

*Lock & Shop Program allows consumers who have a Pennymac BuyerReady Certification for a purchase loan with Pennymac to lock a rate prior to locating a property. The program requires a non-refundable fee of $595 due at the time of the rate lock. Consumers with a Pennymac BuyerReady Certification for a purchase loan with Pennymac must meet appropriate underwriting conditions to obtain a mortgage loan. Consumers may choose between a 60-day, 75-day or 90-day lock period. Consumers must initiate a mortgage loan application for a specific property and be under purchase contract for the property at least 30 days prior to lock expiration in order to extend the locked rate. All rate lock extensions are subject to Pennymac’s standard rate lock extension fees. After the rate lock and subject to favorable market conditions, consumers may be eligible for a one-time reduction in rate once the loan application for a specific property has been initiated (0.50 % maximum reduction in interest rate allowed). Eligible loan products are Conventional Fixed, Conventional ARM, FHA Fixed and VA Fixed. Program excludes Jumbo, refinance, third-party and in-process loans. Program subject to termination in Pennymac’s sole discretion and without notice.

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Source: pennymac.com

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Sales of annuities, a financial product that can provide a lifetime income stream in retirement, are smashing records as Americans look to lock in high interest rates.

Sales of one type of annuity in particular, fixed-rate deferred annuities, have more than tripled in the last two years, rising to $164.9 billion in 2023 up from just over $50 billion in both 2020 and 2021, according to trade association LIMRA.

With annuities, you pay a lump sum to an insurance company to receive monthly payments for life that begin on an agreed upon date, which Americans commonly align with their retirement. Annuities with deferment periods are popular for people in their 50s or 60s who want a product that will grow tax-deferred before they convert it to a steady income stream.

Fixed-rate deferred annuities are the “most basic product” out of the many different types of annuities because they grow at a guaranteed annual rate, says Chris Blunt, CEO of F&G, an annuity provider that is a subsidiary of Fidelity. His company has seen 46% growth in the space in the past year, thanks in part to more attractive rates.

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In 2022, rates were in the arena of 2.5%, Blunt says. But last year, they soared and now sit around 4% to 5%.

Fixed-rate deferred annuities are behaving similarly to certificates of deposit (CDs), which also provide guaranteed returns at rates that typically move in tandem with the Federal Reserve’s rate decisions.

With inflation cooling and the Fed possibly gearing up for rate cuts in 2024, people are seizing on what could be the last chance to get a rate in the ballpark of 5%.

Unlike CDs, however, annuities are not insured by the Federal Deposit Insurance Corp. (FDIC), and there are typically higher fees as well as a 10% early withdrawal penalty for distributions before age 59 ½. These are clear tradeoffs, but in exchange, you can usually get a better rate with an annuity than a CD.

Annuity sales broke records in 2023

Bryan Hodgens, head of research at LIMRA, says the first jump in annuity sales occurred in late 2022 and early 2023 as interest rates were rising amid high inflation.

“When you had these pretty dramatic increases in interest rates, consumers could now get much higher rates on these fixed annuities,” he says.

Rates have increased in large part because annuity companies invest your dollars in bonds and other securities, which are generating higher returns. Annuity companies were faster to react to the changes in market conditions and adjust their rates compared to banks offering similar products, according to Eric Henderson, president of Nationwide Annuity.

“As the Fed raised rates, banks tended to be slow to raise their CD rates where the insurance industry, the annuity industry moved more quickly, so I think that’s what really caused the surge at first,” Henderson says.

He adds that this was around the time when recession fears were peaking, which meant there was high demand for safe places to stash money that offered returns without the risk of the stock market. Of course, a recession hasn’t materialized and “you would have been better off actually investing in the market, but you didn’t know that at the time,” Henderson says.

Hodgens says the fourth quarter of 2023 marked a second big spike in annuity sales. Sales have boomed again more recently because the Fed is indicating that rate cuts are on the horizon, which is spurring people to buy while current annuity rates are still available.

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Higher rates create opportunities for retirement savers

It’s not just fixed-rate deferred annuities that are hot, Hodgens says, noting that fixed indexed annuities and registered index-linked annuities (RILAs) are also selling at record levels. Like fixed-rate deferred annuities, these products are common tools for retirement planning and they’re more attractive in a high-interest rate environment.

With fixed indexed annuities, you don’t have a constant rate of return like with the fixed-rate variety. Instead, they’re tied to indexes like the S&P 500, but your principal investment is guaranteed, meaning you can’t lose any money. In exchange, the upside — or how much you can earn — is capped.

RILAs are almost exactly the same except instead of not being able to lose money, the insurance company commits to absorbing the first 5% or 10% of loss in the event the index declines in a year, Butler says. There’s still a cap on the upside, but it’s not as large.

Annuities aren’t the right retirement planning tool for everyone: Some have high fees, and alternative retirement savings options may offer greater flexibility or the potential for higher returns. But they can be appealing to people who want a lifetime income stream. One strategy is to combine annuities with Social Security so you can ensure a level of comfort — or at least income — in retirement.

While there’s been plenty of talk around the pain for consumers that comes with high interest rates, annuities are a good example of how there’s also been the emergence of some unique opportunities in fixed income to set yourself up for the future, Hodgens says.

“Most Americans loved their pension plan, it’s just most of us don’t have a pension plan anymore,” Blunt says. Annuities, though, can provide a similar peace of mind that you won’t outlive your savings.

“That can be game-changing in an overall financial plan,” he says. “It gives people more courage to be a little more aggressive on the rest of their savings.”

More from Money:

9 Best Life Insurance Companies of 2024

This Investing Strategy Could Be the Key to a Better Lifestyle in Retirement

Life Insurance vs Annuities Explained

Source: money.com

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As painful as it can be to see interest rates topping 7% when they hovered over 2% in late 2020, waiting for them to come down again could bite would-be homeowners. Although today’s rates mean homebuyers can expect to spend more on interest over their loan’s lifetime, they’re actually close to the 50-year average — and besides, if they plummet again, the market will once again be flooded by buyers who have been sitting on the sidelines.

Still, interest rates are a big deal when it comes to how much home you can comfortably afford — and the ongoing health of your personal finances. In this article, we’ll walk through a little bit of mortgage rate history and context, as well as offering ways to decide whether you’re ready to buy or not, regardless of the market.

Why Are Mortgage Rates So High?

Since Americans just witnessed a historic mortgage interest rate drop in 2020, today’s 7% and 8% rates seem astronomical. (And, to be fair, coupled with a median national home sales price over $400,000, they can pack a powerful punch: After interest, a 30-year mortgage could easily cost twice the amount of the loan.)

Still, it’s important to remember that when you look at the big picture, today’s rates are actually not that big a deal. Yes, they’re the highest they’ve been since the year 2000, but they’re about on par (or slightly under) the rates buyers saw in the 1990s — and less than half of the 17% and 18% interest rates buyers paid in the early 1980s.

The rise and fall of mortgage rates is tied to complicated economic factors, including inflation, the Federal interest rate, and the yield of 10-year Treasury bonds. It’s not totally predictable, but one thing’s for sure: It will continue to undulate over time. What’s more, attempting to time the market to purchase a house might not be the best financial move, even if it does save you money on interest.
💡 Quick Tip: SoFi’s Lock and Look + feature allows you to lock in a low mortgage financing rate for 90 days while you search for the perfect place to call home.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

How Low Will Mortgage Rates Drop This Year?

While no one can fully predict the future, experts do weigh in with their predictions for the mortgage interest rate. In 2024, projections suggest a mortgage interest rate drop to about 6%, or slightly lower — but still, we’re likely to stay far from the 2% and 3% free-for-all we saw a few years ago.

How Your Interest Rate Impacts Your Buying Power

So how much do interest rates really impact how much house you can afford? Glad you asked! Let’s do some math.

Say you’re going to buy a $400,000 home — which is just a little less than the U.S. median sale price right now. You’ve saved up a 20% down payment, or $80,000, and plan on taking out a 30-year mortgage.

With a fixed interest rate of 7%, your monthly payment would be about $2,129 per month, before additional costs like homeowners insurance and property taxes. At 6.5%, that payment goes down to $2,023, and at 6% it drops to $1,919. (So a percentage point drop equates to $210 per month in savings, or $2,520 per year.)

However, it’s over the long term that interest really has the opportunity to add up. In the exact same scenario, over the 30-year lifetime of the loan, you’d pay approximately the following amount in total interest:

•   7%: $446,428

•   6.5%: $408,142

•   6%: $370,682

As you can see, just a single percent difference can save you nearly $100,000 in the long run. So while it’s not possible to perfectly time the market, it is worth shopping around for the lowest possible interest rates you can qualify for.

(Keep in mind, too, that you can always pull your own customized numbers using a mortgage calculator.)
💡 Quick Tip: Don’t have a lot of cash on hand for a down payment? The minimum down payment for an FHA mortgage loan is as low as 3.5%.1

Should You Wait to Buy a Home?

The question of whether you’re ready to buy a home — or if it makes more sense to wait — is one that depends on far more than the going market interest rate. Here are some ways for first-time homebuyers to decide what might be the right move, right now.

Reasons to Buy

These are good reasons to consider going ahead with the homebuying process, high interest rates or no:

•   You’re financially (and emotionally) ready. Your credit score is in tip-top shape, you’ve saved up a down payment, and you’re planning to stay in your new home for at least five years — which means you could feasibly refinance once interest rates drop substantially and still break even on closing costs. (A home affordability calculator can help you figure out just how much house you can reasonably afford.)

•   The market looks good to you. These higher interest rates mean the housing market is moving far more slowly than it used to, so the amount of available inventory may give buyers who are ready to buy more time to shop around and find something they really like. This dynamic can also drive home prices down, creating more value for you as the property appreciates over time.

•   It’s time to move. Regardless of the housing market, life goes on — and if you’re expanding your family or relocating, you may not have a choice about moving. If the opportunity is presenting itself and you’re financially ready, this could be a great time to get started on building equity and generational wealth as a homeowner.

Reasons to Wait

On the other end of the spectrum, there are some good reasons to wait on buying a home, even when interest rates are low:

•   You’re not financially (or emotionally) ready. If a monthly mortgage payment would leave you cash-poor, you don’t have a substantial emergency fund saved up, your job security is in question, or you’re not quite sure you’re ready to commit to a given locale, buying a home might not be the right move for you — yet.

•   You can’t get prequalified by a mortgage lender. Perhaps you’re in a decent amount of debt or have an iffy credit history. If you can’t qualify for a loan right now, take the time to work on those factors and get ready for the future.

•   The market looks meh to you. If you can’t find a home you like, you probably shouldn’t buy one. After all, it’s a major investment — and while we’re not suggesting you have to wait for an absolutely perfect house to come along, you should be happy with your purchase!

Should Interest Rates Influence Your Decision?

While interest rates are of course a relevant factor for would-be homeowners, so long as you’re financially prepared and planning on staying in your new home for at least a few years, higher interest rates shouldn’t deter you. After all, you can always refinance once rates drop.

The Takeaway

Waiting for interest rates to drop can be a bit like waiting for Godot: You might get stuck in the in-between. If your finances are in shape and you’ve found your dream home, now could still be the right time to take the leap and become a homeowner.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Is it better to wait for interest rates to go down?

Not necessarily. While lower interest rates can subtly lower a monthly mortgage payment — and save buyers potentially hundreds of thousands of dollars over the lifetime of a loan — it’s not the only factor to consider if you’re otherwise ready to buy a home. (Plus, qualified buyers can always refinance their purchase down the line when rates drop again.)

Will 2024 be a good year to buy a house?

It’s probably as good a year to buy as any. Many experts expect interest rates to drop a bit this year, from their current position between about 7% and 8% to somewhere between 5.5% and 6.5%. And it’s unlikely that interest rates will plummet back down to 2% or 3% as they did a few years ago.

What month is the best time to buy a house?

November and December tend to be favorable times to buy a home for buyers looking for the best deal possible. That’s because the holidays and winter weather may keep some buyers from shopping during this time, which means sellers might be more motivated to make a deal. You won’t get to see your new home in the height of its summer beauty for months — but you’ll get to find out whether it’s well insulated!

Photo credit: iStock/Andrii Yalanskyi

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.

+Lock and Look program: Terms and conditions apply. Applies to conventional purchase loans only. Rate will lock for 91 calendar days at the time of preapproval. An executed purchase contract is required within 60 days of your initial rate lock. If current market pricing improves by 0.25 percentage points or more from the original locked rate, you may request your loan officer to review your loan application to determine if you qualify for a one-time float down. SoFi reserves the right to change or terminate this offer at any time with or without notice to you.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Source: sofi.com

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As you go through the process of purchasing a home, you may be caught off guard by the various expenses that arise. While buying a home is already a costly endeavor, you may be surprised to find that small fees and charges can quickly add up. They can potentially increase your overall spending on the home by thousands of dollars.

Among these costs are mortgage loan origination fees. Lenders charge origination fees to cover the process of your mortgage application. This includes everything from assessing your financial information to preparing and completing the necessary paperwork.

Here’s what you can expect — as well as what you can do to reduce the financial pain associated with mortgage origination fees.

The Role and Impact of Loan Origination Fees

Loan origination fees are a critical component in the mortgage process, serving as compensation for the lender’s extensive work in preparing your mortgage. These fees cover a wide range of tasks essential to moving your loan from application to approval.

Detailed Work Covered by Origination Fees

Your loan’s journey to approval involves significant effort and expertise from your loan officer, including:

  • Document organization and review: Organizing and reviewing your submitted documents ensures that all necessary paperwork is complete and accurate.
  • Collaboration with underwriting: Working closely with underwriters, loan officers assess your financial information to make informed decisions on loan approval.
  • Income and financial analysis: Analyzing your income and financial status helps determine your ability to afford monthly payments, a key factor in the loan decision.
  • Verification of application claims: The accuracy of your loan application, supported by documents from banks, employers, and tax returns, is meticulously verified.
  • Eligibility for government programs: Assessing your eligibility for government-backed mortgage programs that may offer favorable terms.
  • Investor compatibility: Ensuring your loan aligns with investor criteria is vital for the lender’s ability to sell the loan, affecting liquidity and risk management.

While it’s tempting to view origination fees as unnecessary add-ons, they are, in reality, the cost of labor-intensive and specialized services that make your mortgage possible. These fees are not merely for processing paperwork; they encompass a deep dive into your financial life to secure the best possible loan terms on your behalf.

Identifying Origination Fees in Loan Documents

Origination fees might be listed under various names in your loan documents, such as “underwriting fees,” “processing fees,” or “application fees.” These are integral to the origination charge. The Loan Estimate, a document you receive early in the application process, will itemize these costs for clarity. If the breakdown of fees is unclear, asking your loan officer for guidance is a practical step.

Check Out Our Top Picks for 2024:

Best Mortgage Lenders

Typical Costs of Loan Origination Fees

Loan origination fees can vary greatly among lenders and are not uniform. However, it’s common for lenders to charge a percentage of the loan amount, typically between 0.5% and 2% of the mortgage.

To some borrowers, that might seem a little strange. After all, if you’re getting a loan for $200,000, it takes about the same amount of work to originate the loan as it would for a $400,000 loan. Yet, there’s a chance the borrower paying for a bigger mortgage will pay a higher amount.

When deciding how much you’re willing to pay for a loan origination fee, it’s important to consider interest rates and other fees you might be paying.

Realize that a mortgage origination fee (and points, too) can be rolled into your mortgage. So if you decide not to pay the fees with cash out of your pocket, you could add them to your mortgage balance — and then you must pay interest on them. So, carefully consider this when deciding how to proceed.

Tips for Reducing a Loan Origination Fee

Since you are already paying a significant amount for your mortgage, it may be beneficial to try to lower your loan origination fee. Every dollar saved can be put towards purchasing new furniture or other expenses for your new home. Here are some strategies to consider if you want to reduce your origination fee:

1. Shop Around

No matter what you’re buying, one of the best ways to get a good deal is to shop around. Ask between three and five mortgage lenders for quotes on mortgages, including what their loan origination fee will be. Get a total dollar amount for the upfront fee charged, along with the interest rate being charged.

Run the numbers to see where you’ll get the best deal. Remember: sometimes it’s worth it to pay slightly higher fees if you can get a better rate. Look at the overall cost of the loan over time as you make your choice.

2. Negotiate

Ask the mortgage lender to waive some of the origination fee. Identify different fees, and see if some of them can be dropped from the cost. It’s easier to get results if you can show quotes from other lenders and compare fees. If you’re a good potential borrower, a lender might be willing to give you a break to get your business.

3. Accept a Higher Interest Rate

A mortgage lender may be willing to cover your closing costs in exchange for a higher interest rate on your loan. However, keep in mind that a higher interest rate may result in additional costs over the lifespan of the loan. So, it’s typically better to pay loan origination fees upfront rather than agreeing to a higher interest rate.

With that said, this strategy may work when you know you’ll sell your home in a relatively short period of time. That way, your interest costs don’t wind up exceeding the savings you received from getting a discount on your origination fee.

4. Ask for Seller Concessions

You might be able to get your origination fees included in closing costs, covered by the home seller. That way, the home seller covers these costs instead of you. However, you might need to slightly increase your offer price depending on the situation. Additionally, make sure that this condition appears in the purchase agreement.

5. Gifts from Relatives

It is possible to use gifted funds to cover mortgage origination fees. However, it must be clear that the funds are genuinely a gift. The donor may need to have a family member. They may also have to provide a written statement that confirms the donation is a gift with no strings attached.

If you know someone willing to do this for you, it can be a way to save a little extra money. And you can let your relative off the hook when it comes to getting you a house-warming gift or birthday presents for the next several years.

How to Ensure You’re Getting the Best Mortgage Terms

Buying your first home is a big deal. But, unfortunately, it’s also one of the most complex financial transactions you’re likely to make during your lifetime. To avoid paying more than you have to, make it a point to pay close attention to the terms of your mortgage. The Loan Estimate is a great tool to help you see your total loan costs.

Shop around, compare mortgage lenders, and ask about origination fees ahead of time. Some lenders try to shift them to other titles or find other ways to make money. However, if you compare total costs and run the numbers, getting the best deal for you should be possible.

Frequently Asked Questions

How is the loan origination fee paid?

The loan origination fee is typically paid at closing and can be paid in several ways: upfront as part of the closing costs, financed into the loan amount, or, in some cases, through a higher interest rate where the lender covers the fee. The method of payment can affect the total cost of the loan over its lifetime, so borrowers should consider which option best suits their financial situation.

Does a lower loan origination fee mean a better loan deal?

Not necessarily. While a lower loan origination fee can reduce the upfront cost of obtaining a mortgage, it’s important to consider the loan’s overall terms, including the interest rate and other fees. Sometimes, a loan with a lower origination fee may come with a higher interest rate, increasing the cost over the life of the loan. Borrowers should evaluate the entire loan package to determine the best deal.

Can I negotiate the interest rate and loan origination fee separately?

Yes, borrowers can negotiate the interest rate and loan origination fee separately with the lender. Lenders may have set criteria for determining interest rates based on creditworthiness and market conditions. However, there may still be room for negotiation, especially if the borrower has strong credit or is comparing offers from multiple lenders. Similarly, the loan origination fee can sometimes be reduced or waived entirely, depending on the lender’s policies and the competitive lending environment.

Are loan origination fees refundable if the loan is not finalized?

Generally, loan origination fees are not refundable if the loan application is approved, but the borrower decides not to proceed with the loan. However, if the loan application is denied or if the borrower withdraws the application before the lender has incurred significant expenses, part or all of the fee may be refundable. The refund policy can vary by lender, so it’s important to ask about this before submitting a loan application.

How do loan origination fees impact refinancing?

When refinancing a mortgage, borrowers will likely encounter loan origination fees just as they would with a new mortgage. These fees should be considered in the overall cost-benefit analysis of refinancing.

If the goal of refinancing is to lower the monthly payment or the total interest paid over the life of the loan, the costs of origination fees should be weighed against the potential savings. In some cases, lenders may offer a no-cost refinancing option, where the origination fees and other closing costs are either waived or included in the loan balance, but this may result in a higher interest rate.

Source: crediful.com

Mortgage rates dropped to 6.63% this week, according to Freddie Mac’s Primary Mortgage Market Survey. Rates for 30-years fixed-rate mortgages were 6.69% last week, dropping by 0.06 percentage points.

Rates for 15-year mortgages also dropped slightly from 5.96% last week to 5.94% this week. Both 15-year mortgages and 30-year mortgage rates are still higher than they were last year.

A year ago, 30-year mortgages sat at 6.09%, on average, while 15-year mortgages averaged 5.14%, Freddie Mac reported.

“Mortgage rates have been stable for nearly two months, but with continued deceleration in inflation we expect rates to decline further,” Freddie Mac Chief Economist Sam Khater explained.

“The economy continues to outperform due to solid job and income growth, while household formation is increasing at rates above pre-pandemic levels. These favorable factors should provide strong fundamental support to the market in the months ahead.”

As mortgage rates drop, you may decide it’s the right time to finally buy a home. To find the right mortgage for your needs, Credible can show you multiple mortgage lenders all in one place and provide you with personalized rates within minutes.

HOMEOWNERS INSURANCE RATES ON THE RISE, MAINLY DUE TO INCREASE IN NATURAL DISASTERS

Home prices are lowering in some major cities

After remaining for high most of the year, home prices are dropping slightly in some metro areas. 

Data from a recent S&P report showed prices in 12 out of 20 metro areas decreasing. This decrease in prices has led some households to move across state lines in search of more affordable areas.

Charlotte, Providence and Indianapolis saw the largest increase in buyers as they fled high-cost cities, stated a Zillow report.

Households that made these moves found homes were $7,500 less, on average, than where they left.

Cities that saw the highest outflow in households included Chicago, San Diego and Cincinnati. These metro areas often have higher housing costs and less robust economies, Zillow found.

If you think you’re ready to shop around for a home loan, consider using Credible to help you easily compare interest rates from multiple lenders, all without affecting your credit score.

HOMEOWNERS MOVING ACROSS STATE LINES, SEEKING AFFORDABILITY, FIND IT IN CERTAIN CITIES

It’ll be years before homes are affordable for the average buyer

The housing market is trudging toward recovery, largely thanks to mortgage interest rates dropping in recent months.

“The surge in pending home sales and new home sales, both determined by contract signings in the early stages of the buying process, indicates increased participation from buyers in the market,” explained Realtor.com Economist Jiayi Xu in response to Freddie Mac’s recent mortgage rates update. “Simultaneously, the recent rise in listing activity suggests that sellers are closely monitoring mortgage rates and adjusting their selling strategies accordingly.”

Potential homebuyers won’t see a full recovery anytime soon, however. JP Morgan experts predict that the real estate market will become affordable again about three and a half years from now. This is largely dependent on continued interest rate decreases.

“Despite the promising increase in listing activity, inventory is likely to remain low as sellers may not respond as swiftly as anticipated. In other words, a more substantial improvement in mortgage rates is necessary to attract more sellers to the market,” Xu said.

Until rates drop more substantially, mortgage payments are likely to stay high. In November 2023, the average monthly mortgage payment was $2,198, up from $1,993 a year earlier, a National Association of Realtors report found.

If buying a home is your near future, make sure you’re getting the best mortgage lender and rates with the help of Credible. Credible helps you compare rates and lenders and get a mortgage pre-approval letter in minutes.

JUST OVER 15% OF HOME LISTINGS WERE CONSIDERED AFFORDABLE IN 2023: REDFIN

Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.

Source: foxbusiness.com

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The 30-year fixed mortgage rate surpassed the 7% mark on Monday on the heels of strong economic data and the Federal Reserve signaling that it will move carefully with any future cuts to interest rates.

The 30-year conforming fixed mortgage rate was at 7.04% on Mortgage News Daily and 6.91% on HousingWire’s Mortgage Rate Center.

It’s the first time since December that the average 30-year fixed rate has eclipsed 7%. Mortgage rates briefly exceeded 8% in October but had eased as investors gained confidence that the Fed was nearing the end of its phase of interest rate hikes. 

Mortgage rates took a sharp turn following a blowout jobs report, which demonstrated that the U.S. labor market is posed to support broader economic growth. About 353,000 jobs were added in January, up from a revised rate of 333,000 in December. 

Fed Chair Jerome Powell’s message that the central bank will move carefully on rate cuts, given in an interview with “60 Minutes” after last week’s Federal Open Market Committee (FOMC) meeting, is what sent mortgage rates higher on Monday.

“The prudent thing to do is … to just give it some time and see that the data confirm that inflation is moving down to 2% in a sustainable way,” Powell said in the interview that aired Sunday night.

“Growth is going on at a solid pace, the labor market is strong, 3.7% unemployment,” Powell said. “With the economy strong like that, we feel like we can approach the question of when to begin to reduce interest rates carefully. We want to see more evidence that inflation is moving sustainably down to 2%.”

After the most recent FOMC meeting on Feb. 1, Powell signaled that the central bank isn’t likely to cut interest rates in March as investors had hoped.

“In fact, Powell believes the Fed can wait until it sees more labor damage before cutting the Federal Funds Rate aggressively or moving toward a neutral policy stance, saying again that a March rate cut is ‘unlikely,’” Logan Mohtashami, lead analyst at HousingWire, wrote in commentary on Monday. 

Mortgage rates track the yield on 10-year U.S. Treasurys, which move based on anticipation about the Fed’s actions, what the Fed actually does and how investors react. When Treasury yields go down, so do mortgage rates. 

The 10-year Treasury yield rose to 4.16% as of Monday at 5 p.m. EST, up from 4.03% on Friday. 

“Powell’s latest interview makes it clear: Nothing big will change over the next few months no matter what happens with inflation — the labor market hasn’t broken enough for the Federal Reserve to pivot,” Mohtashami wrote. 

Source: housingwire.com

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Published 9:25 a.m. UTC Feb. 5, 2024

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Today’s home equity line of credit (HELOC) rates, if you borrow $100,000, are 9.11% with a 60% loan-to-value (LTV) ratio, 9.26% with 80% and 9.95% with 90%.

Today’s HELOC rates

*Data accurate as of February 2, 2024, the latest data available.

Current HELOC rate trends

Here is the average annual percentage rate (APR) for a $100,000 HELOC at different LTV ratios — 60%, 80% and 90%.

HELOC rates: 60% LTV ratio

The HELOC rate today for a borrower with an LTV ratio of 60% sits at 9.11%. This means it’s the same as last week, according to data from Curinos. Last month, the rate was at 9.13%.

HELOC rates: 80% LTV ratio

The average HELOC rate if you have an LTV ratio of 80% stayed the same as last week at 9.26%, according to data from Curinos. This is down from last month’s 9.28%.

HELOC rates: 90% LTV ratio

Today’s average HELOC rate is 9.95% with a 90% LTV ratio which is the same as last week, according to data from Curinos. This is about the same as last month’s 9.95%.

Before you borrow, compare the best HELOC lenders.

Frequently asked questions (FAQs)

During the COVID-19 pandemic, many banks stopped offering HELOCs due to uncertainty surrounding the economy. However, numerous banks have resumed offering HELOCs to customers today.

There are many reasons why you might not qualify for a HELOC. For example, a lender could deny your application if:

  1. Your LTV ratio is too high.
  2. Your DTI ratio is too high.
  3. Your credit score is too low.
  4. You don’t have a history of on-time payments.
  5. You don’t have a stable source of income.

If you can’t qualify for a HELOC because of any of the above reasons, your best option is likely to work on paying down debt along with building more equity in your home.

There are also some alternatives to consider if you’re disqualified. For example, a home equity loan or personal loan could be a good option. Unlike HELOCs, both of these alternatives generally come with fixed interest rates, giving you predictable payments over the life of the loan. However, you might end up with a higher interest rate than you would with a HELOC.

Additionally, home equity loans and personal loans are paid out in lump sums — meaning you’ll need to know exactly how much you need to borrow before applying.

Explore the difference: HELOC vs. home equity loan

Repayment terms for HELOCs typically range from five to 30 years. This generally comprises a draw period of up to 10 years and then up to 20 years to repay what you’ve borrowed.

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Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.

Blueprint has an advertiser disclosure policy. The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.

Jamie Young is Lead Editor of loans and mortgages at USA TODAY Blueprint. She has been writing and editing professionally for 12 years. Previously, she worked for Forbes Advisor, Credible, LendingTree, Student Loan Hero, and GOBankingRates. Her work has also appeared on some of the best-known media outlets including Yahoo, Fox Business, Time, CBS News, AOL, MSN, and more. Jamie is passionate about finance, technology, and the Oxford comma. In her free time, she likes to game, play with her two crazy cats (Detective Snoop and his girl Friday), and try to keep up with her ever-growing plant collection.

Ashley is a USA TODAY Blueprint loans and mortgages deputy editor who has worked in the online finance space since 2017. She’s passionate about creating helpful content that makes complicated financial topics easy to understand. She has previously worked at Forbes Advisor, Credible, LendingTree and Student Loan Hero. Her work has appeared on Fox Business and Yahoo. Ashley is also an artist and massive horror fan who had her short story “The Box” produced by the award-winning NoSleep Podcast. In her free time, she likes to draw, play video games, and hang out with her black cats, Salem and Binx.

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Source: usatoday.com