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MORTGAGE RATE

Apache is functioning normally

June 9, 2023 by Brett Tams

“Persistently high inflation and the recent spike in lending rates will trigger a correction in the UK (Aa3 negative) housing market,” Moody’s Investor Service said in a report.

Matt Cardy | Getty Images News | Getty Images

LONDON – The U.K.’s biggest bank temporarily withdrew mortgage deals via broker services on Thursday, as the effect of higher interest rates ripples through the British housing market.

HSBC told CNBC Friday that it was reviewing the situation regularly, but did not specify whether the new deals would differ from its previous offerings. Higher rates are a possibility, given that the Bank of England is continuing to increase interest rates.

It comes eight months after hundreds of mortgage deal offers were pulled in one day after market chaos at the time sparked concerns about rising base rates.

In a statement issued Friday, HSBC said: “We occasionally need to limit the amount of new business we can take each day via brokers. All products and rates for existing customers are still available, and we continue to review the situation regularly.”

The banking group said the protocol was in order to ensure it meets “customer service commitments” and stressed that it remains open to new mortgage business.

Soaring rates

The HSBC decision comes as analysts expect mortgage rates to soar and housing prices to plummet in response to the increased base rate.

A large number of fixed-rate mortgage deals is set to expire this year, leaving homeowners vulnerable to the impact of interest rate hikes, according to economic research company Capital Economics.

The organization made an upward revision to its mortgage rate forecasts, which showed borrowers would be “subject to a larger interest rate shock than … previously envisaged.”

“Those coming to the end of a 2-year fix will see a particularly large increase in the cost of their mortgage. While those refinancing a 5-year fix this month may see their mortgage rate jump from 2.1% to 4.9%, those on a 2-year fix will see an increase from 1.4% to 5.2%,” Capital Economics said in a note published Thursday.

There are also warnings that house prices will tumble in the next two years, with credit ratings agency Moody’s forecasting a 10% decline. 

“Persistently high inflation and the recent spike in lending rates will trigger a correction in the UK (Aa3 negative) housing market,” Moody’s Investor Service said in a report.

The Halifax House Price Index showed that U.K. house prices were flat in May after a 0.4% fall in April, while the average U.K. property now costs £286,532 ($360,000).

In February, U.K. house prices experienced their sharpest contraction since November 2012, according to building society Nationwide.

Watch CNBC's full interview with the Bank of England's Andrew Bailey

Prices tumbled 1.1% year-on-year, logging their first annual decline since June 2020.

The Bank of England raised its interest rate to 4.5% from 4.25% as the central bank attempts to tackle high inflation that currently sits well above the 2% target, at 8.7%. 

The Organization for Economic Cooperation and Development predicts the U.K. will have the highest inflation rate out of all advanced economies this year.

Lenders and homeowners will be watching the central bank closely for its next base rate decision on June 22. It is widely expected the bank will agree its thirteenth consecutive increase.

Source: cnbc.com

Posted in: Savings Account Tagged: 2, About, Advanced, All, average, Bank, Banking, borrowers, Broker, brokers, building, business, buyers, cnbc, company, cost, Credit, customer service, Deals, decision, Development, Economics, existing, Fall, Financial Wize, FinancialWize, fixed, forecasting, Forecasts, home, home buyers, homeowners, house, Housing, Housing market, housing prices, HSBC, impact, in, index, Inflation, inflation rate, interest, interest rate, interest rates, Investor, jump, lenders, lending, lending rates, market, Moody's, More, Mortgage, MORTGAGE RATE, Mortgage Rates, new, News, november, offers, one day, organization, price, Prices, products, property, rate, Rate Hikes, Rates, ratings, refinancing, Research, Review, soaring, society, target, time, will

Apache is functioning normally

June 9, 2023 by Brett Tams

Millions of Americans would love to become homeowners—if they could only find an affordably priced home to purchase, that is.

Cue the builders. After years of focusing on the more profitable move-up, custom, and luxury homes, they are finally figuring out how to put up starter homes that first-time and other cash-strapped homebuyers can afford.

“Buyers should expect that over the next 12 to 24 months there will be a notable increase in the number of entry-level homes available,” says Ali Wolf, chief economist of Zonda, a building consultancy.

Homebuilders have begun to focus on this group in the wake of rising mortgage interest rates dramatically cooling off the housing market. Many current homeowners who don’t have to trade up into a new home at a higher monthly rate are choosing to stay put.

And that’s left much of the demand for housing coming from first-time and other buyers who aren’t finding the kinds of homes they want on the resale market.

Before the COVID-19 pandemic, about half of all new homes cost $300,000 or less, according to Zonda. However, lumber prices soared over that period and global supply chain snafus led to high prices and long delays in receiving materials, appliances, and other building components. In the first quarter of this year, just 15% of new construction was available at that price range.

To produce housing more inexpensively, builders downsized the median new-home footprint about 3% year over year, to about 2,270 square feet in the first quarter of this year, according to the National Association of Home Builders. The logic goes that smaller homes on less land typically cost less to construct than larger residences on more acreage. So builders can sell these properties at lower prices.

Townhome construction has also risen as builders can put up more residences on less land. Two years ago, townhomes made up 11.5% of all single-family construction, according to NAHB. It has since risen to 15% in the fourth quarter of 2022.

“Whenever you see an increase in interest rates and a decline in housing affordability, the market shifts a little bit toward somewhat smaller homes,” says NAHB Chief Economist Robert Dietz.

However, buyers shouldn’t get their hopes up too high.

Builders are expected to erect just 6% more entry-level homes this year compared with last, according to the May homebuilder survey from John Burns Research and Consulting.

“Builders will increase their supply of entry-level homes, but it won’t be enough,” says Dietz. This kind of home “will probably remain undersupplied. That’s frustrating news for first-time buyers.”

Why builders aren’t producing more starter homes

Fixing the housing shortage might seem simple: Builders need to put up more homes. But like most things, it’s easier said than done.

In the run-up to the Great Recession, builders erected homes at what seemed like a breakneck pace. But when the housing market went bust in the 2000s, many builders went belly up. Construction workers found other jobs, and sites sat fallow. Even as housing demand has soared over the past decade, builders have struggled to ramp back up. They have also been more cautious this time around, preferring to construct homes they are confident they can sell.

More new construction did go up during the pandemic, and many builders profited from the increase in home prices. But the challenges to putting up more affordable homes aren’t exaggerated.

The shortage of skilled construction workers has persisted, supply chain issues have caused delays and pricier building materials and appliances, and there is a lack of land in many parts of the country. Builders must also contend with zoning restrictions and community opposition to smaller homes. Many local governments also charge builders impact fees, which can total tens of thousands of dollars in some places, to pay for new roads, schools, and water and sewer lines.

Then throw in higher mortgage rates hampering demand for these abodes and a banking crisis that’s likely to make it harder for builders to get loans to erect new homes.

“There is a desire and an acknowledgment of the need for more entry-level housing, but there are also a lot of constraints that prevent that from happening,” says Wolf.

Where are starter homes going up?

While there is a need for starter homes across the country, not every community will see them rise. Builders will focus on areas where there is more land available and fewer costly regulations. They include states such as Texas and Florida in the Southeast as well as swaths of the Midwest.

Starter homes will still be built in the Northeast and West, but costly land, labor, and regulatory expenses tend to push construction prices out of reach of cost-constrained buyers.

“Where the zoning permits it, you are seeing builders trying to provide more affordable homes,” says Dietz.

How homebuilders are making starter homes more affordable

About 42% of builders plan to reduce the square footage of the homes they produce.

(JIM WATSON/AFP via Getty Images)

The trade-off that buyers will face as more affordably priced, new construction goes up for sale is that it likely won’t be as luxurious as new homes have traditionally been.

“The home probably won’t feel particularly premium at a low price point right now,” says Wolf.

More than half of builders are changing things on the exterior or in the interior of their homes to bring down costs, according to the John Burns survey. This could be vinyl countertops instead of granite and carpeting instead of hardwood floors.

About 42% of builders plan to reduce the square footage of the homes they produce, 22% will offer smaller lots, and 20% will construct more attached homes, such as townhomes and duplexes, according to the survey.

For example, the nation’s largest homebuilder, D.R. Horton, is shrinking the average square footage of its homes by 2% in the second quarter of this year to address affordability concerns, according to a company spokesperson.

“When affordability gets stretched, buyers will accept smaller square footage and less expensive finishes in order to purchase a home,” says Devyn Bachman. She is the senior vice president of research and operations at John Burns.

Another tool that builders have at their disposal is buying down mortgage rates. Many have their own financing arms, which allow them to offer buyers savings through temporary and permanent mortgage rate buydowns.

The 2-1 buydown allows buyers to shave 2 percentage points off of their mortgage in their first year of homeownership, 1 percentage point in the second, and then it reverts to whatever the rate was when the borrower took out the loan for the rest of the mortgage. That means if rates are currently 6.5%, borrowers would have a 4.5% rate in the first year, a 5.5% rate in the second, and then the rate would revert to 6.5% for the remaining 28 years of a 30-year fixed-rate loan.

“When housing demand pulls back, builders try to provide a more affordable product,” says Dietz.

Source: realtor.com

Posted in: Market News, Paying Off Debts Tagged: 2, 2022, 30-year, About, affordability, affordability concerns, affordable, affordable homes, All, appliances, ARMs, average, Banking, before, best, borrowers, builders, building, building materials, Built, buydown, buyers, Buying, company, construction, cooling, cost, country, covid, COVID-19, COVID-19 pandemic, Crisis, custom, entry, expenses, expensive, Family, Fees, Financial Wize, FinancialWize, financing, first-time buyers, First-time Homebuyers, fixed, Florida, great, hardwood, hardwood floors, home, home builders, home prices, Homebuilders, Homebuyers, homeowners, homeownership, homes, Housing, Housing Affordability, housing demand, Housing market, Housing shortage, How To, impact, in, interest, interest rates, jobs, Land, loan, Loans, Local, low, LOWER, Lumber prices, Luxury, luxury homes, Make, making, market, Midwest, More, Mortgage, mortgage interest, Mortgage Interest Rates, MORTGAGE RATE, Mortgage Rates, Move, NAHB, National Association of Home Builders, new, new construction, new home, News, offer, Operations, or, Other, pandemic, Permits, plan, points, premium, president, price, Prices, Purchase, rate, Rates, reach, realtor, Realtor.com, Recession, Regulatory, resale, Research, right, rise, Robert Dietz, sale, savings, schools, second, Sell, shortage, simple, single, single-family, single-family construction, Sites, square, square footage, states, stretched, survey, texas, time, townhomes, vinyl, will, workers, zoning

Apache is functioning normally

June 9, 2023 by Brett Tams

Mortgage rates are rising, refinances are trending, and older news is looming. Let’s cover all of it in this week’s Mortgage Monday update!

Rates Update

Last week, mortgage rates hit their highest since October 2019 – but let’s rewind a bit. For the week ending February 3, Freddie Mac actually reported generally stable rates from the average lender. Like many experts, they believe our economic recovery following Omicron will result in rate increases; what their weekly survey didn’t account for, however, was last Friday’s market changes.

On February 4, the US Bureau of Labor Statistics released their monthly jobs report for January. In short, things are looking up – there were significant job increases last month even in the face of Omicron – and markets were forced to respond. A return to a better economy will also inevitably mean a return to higher rates, and last week’s mortgage rate increases are already reflecting that.

We’ll likely see Freddie’s PMMS catch up with last week’s rate spike on Thursday. But for now, get in touch with your Total Mortgage loan officer if you’ve been considering a home purchase or refinance. Rates are rising faster than ever and are projected to continue doing so, especially after the Fed’s recent hinting at further increases in March.

Refinances are Trending as Rates Rise

Because rates are rising, refinance numbers are up and trending. In late January, mortgage refinancing accounted for 57.3 percent of applications in The Mortgage Bankers Association’s Refinance Index. As rates rise, the window to refinance at something lower naturally closes; we predict that refi numbers will continue along this trend through February until mortgage rates hit pre-pandemic levels.

In the meantime, our door is always open if you’re looking to refinance. The opportunity to do so is certainly dwindling, so be sure to act fast and get in touch with us. Find your mortgage banker today!

Older, But Still Important News

The Federal Housing Finance Agency (FHFA) announced upcoming fee increases for certain Fannie Mae and Freddie Mac home loans. Effective April 1, 2022, upfront fees for these options will have the following increases:

  • Upfront fees for high-balance loans will increase between 0.25 and 0.75 percent.
  • Upfront costs for second home loans (non-primary residence) will increase between 1.125 and 3.875 percent.

These increases will ultimately depend on each product’s loan-to-value ratio. “High-balance” loans qualify as any that go above the conforming baseline limit introduced on January 1 – more information on that below.

Last month, the borrowing limits for Conventional and Federal Housing Administration (FHA) loan options saw significant increases to help buyers combat rising market prices. The conforming limit for single-unit home loans is now $647,200 – an 18.05 percent increase from last year’s limit. To learn more about these changes and your new borrowing options, get in touch with your Total Mortgage loan officer.

In Closing

So far, 2022 has shown us just how reactive the markets (and mortgage rates) can be. In just a couple of months, rates have gradually shifted to their highest in years – meaning that the historic lows we’ve been used to seeing are now behind us. If homeownership is one of your goals for the year, it would be best to act sooner than later. Contact us at any time to get started!

As always, we’ll continue to monitor mortgage rates, industry news, and more to keep you informed. Enjoy the rest of your week!

Source: totalmortgage.com

Posted in: Refinance, Renting Tagged: 2022, About, Administration, All, Applications, average, balance, best, borrowing, Bureau of Labor Statistics, buyers, closing, couple, economic recovery, Economy, experts, Fannie Mae, Fannie Mae and Freddie Mac, fed, Federal Housing Finance Agency, Fees, FHA, FHFA, Finance, Financial Wize, FinancialWize, first-time home buyer, Freddie Mac, get started, goals, historic, home, home loans, home purchase, homeownership, Housing, housing finance, in, index, industry, Industry News, job, jobs, jobs report, Learn, loan, Loan officer, Loans, LOWER, market, markets, More, Mortgage, Mortgage Bankers Association, mortgage loan, mortgage monday, MORTGAGE RATE, Mortgage Rates, mortgage refinancing, new, News, opportunity, or, pandemic, percent, PMMS, Prices, Purchase, rate, Rates, Refinance, refinancing, return, rise, second, second home, short, single, stable, statistics, survey, the fed, time, trend, update, value, will

Apache is functioning normally

June 9, 2023 by Brett Tams

Depending on which rate tracker you look at, mortgage rates decreased, moved sideways or increased on a week-over-week basis.

Since June 1, the yield on the benchmark 10-year Treasury moved up 18 basis points to close at 3.78% on Wednesday.

But the spreads remain abnormally wide, and that likely contributed to the divergent movements among different trackers that use different methodology. The normal spread between the 10-year Treasury and the 30-year fixed-rate mortgage is between 150 and 200 basis points; no matter which tracker is used, they currently are in the 300 basis point range.

Freddie Mac’s Primary Mortgage Market Survey, which takes in rates on submissions to its Loan Product Advisor automated-underwriting system, reported an 8 basis point decline in the 30-year fixed-rate mortgage to 6.71% for June 8 from 6.79% one week prior. For the same week in 2022, the 30-year FRM averaged 5.23%.

NMN060823-Freddie Mac rates.png

The 15-year FRM fell to 6.07% from 6.18% week-to-week but rose from 4.38% on a year-over-year basis.

“Mortgage rates decreased after a three-week climb,” said Sam Khater, Freddie Mac’s chief economist, in a press release. “While elevated rates and other affordability challenges remain, inventory continues to be the biggest obstacle for prospective home buyers.”

Optimal Blue, a division of Black Knight, reported the 30-year conforming mortgage at 6.746% as of June 7, based on data submitted to its product and pricing engine. That compared with 6.719% on May 31; on June 1 it fell to 6.649% before tracking higher over the following days.

Zillow’s rate tracker, based on offers, was at 6.61% on Thursday morning, unchanged from the morning of June 1, and down one basis point from the previous week’s average.

“After some mild oscillations, mortgage rates are right where they were this time last week as investors await more conclusive signs of progress on inflation and monetary policy,” said Orphe Divounguy, senior macroeconomist at Zillow Home Loans, in a statement issued Wednesday night. “Last week’s stronger-than-expected employment report caused Treasury yields — and mortgage rates that follow them — to increase.”

But the services sector slowed down in May, according to the Institute for Supply Management purchasing managers’ index report. The price component had its weakest reading in two years, which is likely to be seen in the next Consumer Price Index reading.

“Cooling inflation and a general economic slowdown would put downward pressure on long-term interest rates like the 10-year Treasury yield,” Divounguy said.

On Wednesday, the Mortgage Bankers Association reported a 10 basis point decline in the 30-year FRM to 6.81%.

“The housing market has gotten off to a slow start this summer due to higher mortgage rates, low inventory and economic uncertainty,” a Thursday morning statement from MBA President and CEO Bob Broeksmit said. “The labor market continues to be exceptionally strong, which could bring more buyers back into the market once rates move away from their recent highs.”

Divounguy forecasts that mortgage rate movement should remain muted over the next seven days, “but upward bias remains as investors await next week’s CPI inflation report and Federal Open Market Committee forward guidance.”

Source: nationalmortgagenews.com

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Apache is functioning normally

June 9, 2023 by Brett Tams


With high mortgage rates deterring unnecessary borrowing, a whopping one-third of U.S. home buyers are buying homes in cash, the highest share in close to a decade, according to a report Wednesday from Redfin. 

In April, 33.4% of buyers across the country dipped into their cash reserves, up from 30.7% from a year ago and the highest level since 2014. 


With interest rates at a 15-year high, it’s no surprise that cash purchases are now accounting for a larger share of deals, with buyers who would rely on mortgages shunning the market far more than their cash-spending counterparts. 

Case in point, across the 40 most populous U.S. metros the report analyzed, overall home sales were down 41% year over year in April, while all-cash sales logged a smaller 35% decline. 

The 30-year fixed-rate stood at 6.79% as of Wednesday, close to November’s high of just over 7%, according to lending giant Freddie Mac. 

“A home buyer who can afford to pay in all cash is weighing two potential paths,” Redfin senior economist Sheharyar Bokhari said in the report. “They can use cash to pay for the home and avoid high monthly interest payments, or take out a loan and pay a high mortgage rate. In that case, they could use the money that would have gone toward an all-cash purchase to invest in other assets that offer bigger returns, which could partly cancel out their high mortgage rate.”


Of course cash buyers can still be deterred by high interest rates and may decide that their money is better spent on investments that benefit from higher returns, the report said. 

Meanwhile, buyers who can’t afford to pay in all cash “also have two potential—but different—paths,” Bokhari said. “They can avoid a high mortgage rate by dropping out of the housing market altogether, or they can take on a high rate. That discrepancy is the reason the all-cash share is near a decade high even though all-cash purchases have dropped: Affluent buyers have the choice to pay cash instead of dropping out of the market.”

A smaller “but still noteworthy reason” for the increase in all-cash sales is competition among home buyers, the report said. A chronic lack of homes for sale in certain areas is motivating some shoppers to make an all-cash offer to beat out the other potential buyers.

Source: mansionglobal.com

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Apache is functioning normally

June 9, 2023 by Brett Tams

The housing market is getting stranger by the day.

While affordability has arguably never been worse, prices are rising and there are virtually no homes for sale.

This is making it difficult for both housing bulls and bears to make the case for a boom or a crash.

When all is said and done, we might just experience a stagnant market that fails to keep up with inflation.

And a severe economic downturn in the housing industry due to a lack of sales volume.

New For Sale Listings Hit Seasonal Low in June

new listings

First things first, new real estate listings are off a whopping 25% from a year ago, according to a new report from Redfin.

This covers the four-week time period ending on June 4th. Just 89,249 homes were listed.

And the real estate brokerage noted that new listings fell in all metros analyzed.

The declines were the most pronounced in Las Vegas (-42.3% YoY), Phoenix (-40.9%), Seattle (-40.4%), Oakland (-39.8%), and San Diego (-37.2%).

These happen to be areas that saw massive home price appreciation, then big home price corrections.

It seems homeowners are now staying put in these areas, perhaps as they come to terms with the inability to make a move from a financial standpoint.

Ultimately, the mortgage-rate lock in effect continues to make it both unfavorable and sometimes impossible for existing homeowners to move.

Simply put, selling your home with a 2-3% mortgage rate, only to buy one with a 7% mortgage rate, doesn’t pencil.

And rents aren’t cheap either, so it’s not a viable option to sell and rent for much less.

Active Real Estate Listings Are Falling When They Typically Rise

active listings

Meanwhile, active listings (the number of for-sale homes available at any point during the period) declined 4.6% from a year earlier.

This was just the second decline in 12 months, the first being a week earlier when actives fell 1.7%.

Redfin noted that active listings were also down month-to-month at a time of year when they typically rise.

Because of the lack of new listings, the total number of homes on the market fell to its lowest level on record for an early June.

Long story short, there is no housing inventory, which is somewhat good news because there aren’t a lot of buyers either.

As noted, affordability isn’t great with mortgage rates at/near 7% and home prices still historically high.

This explains why the median home sale price was down just 1.6% from a year ago at $379,463.

That represented the smallest decline in the past three months as many markets that were down year-over-year begin to turn things around.

Housing Supply Is Up Slightly from a Year Ago

available supply

While new listings and active inventory are down, housing supply inched up a bit from last year.

As of June 4th, supply was at 2.6 months, which is the amount of time it would take to clear inventory at the current sales pace.

But while it’s up 0.5% from a year ago, it’s still well below the 4-5 months that represents a healthy, balanced housing market.

The reason it’s higher is because homes are sitting on the market longer and taking more time to receive offers.

Again, you can blame affordability for this as there are fewer eligible buyers out there. And perhaps fewer who are interested even if they can afford it.

About a third of homes that went under contract received an accepted offer within the first two weeks on the market, down from 38% a year ago.

And homes that sold were on the market for a median 28 days (the shortest span since September), but much longer than the record low 18 days a year earlier.

So it’s clear the housing market isn’t thriving at the moment, but due to a continued lack of inventory, prices remain sticky.

But that could change if mortgage rates remain elevated during the softer part of the calendar year (summer/fall/winter).

Still, the resilience of home prices continues to exceed expectations and defy the housing bears.

Read more: When will the housing market crash again?

Source: thetruthaboutmortgage.com

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Apache is functioning normally

June 9, 2023 by Brett Tams

Mortgage Q&A: “Why are refinance rates higher?”

If you’ve been comparing mortgage rates lately in an effort to save some money on your home loan, you may have noticed that refinance rates are higher than purchase loan rates.

This seems to be the case for a lot of big banks out there, including Chase, Citi, and Wells Fargo, which while enormous institutions aren’t necessarily the leaders in the mortgage biz anymore.

In fact, today Quicken Loans is #1, followed by United Wholesale Mortgage in the #2 spot, then a mix of these big banks and nonbanks, including loanDepot, Caliber Home Loans, and others.

So why is that some of the big guys list “purchase rates” and “refinance rates” separately, with different pricing, points, and APRs?

Well, for starters a home purchase is not the same as a mortgage refinance, though both processes are very similar, and the underlying loans themselves aren’t much different.

Ultimately, a home purchase loan is for someone who has yet to buy a property, whereas a mortgage refinance is for an existing homeowner who wants to redo their home loan.

We know they are different objectives, but if the underlying loans are both 30-year fixed mortgages with the same loan amounts, the same borrower credit scores, and the same property types, why should rates be any different?

Home Purchase Mortgages Default the Least

default rates

There are three main types of mortgages, including home purchase loans, rate and term refinances, and cash out refinances.

The first is self-explanatory and was already explained above, the second is simply redoing your current mortgage by obtaining a new interest rate and loan term, without changing the loan amount.

The third type results in a larger loan amount at closing because you’re pulling equity from your home, which a layman should assume would be the riskiest transaction.

After all, if a borrower now owes more debt, and maybe even has a higher monthly mortgage payment as a result, their default risk should rise.

Simply put, when you pull cash out of your home, you increase your outstanding loan balance, increase your loan-to-value ratio (LTV), and reduce your available home equity, that’s riskier.

This in theory should result in a higher mortgage rate to compensate for increased risk. And guess what – that is indeed the case. Cash out refinance rates are the highest, all else being equal, for basically all banks and lenders.

At least something makes sense around here…

A Rate and Term Refinance Sounds the Least Risky, Doesn’t It?

refinance rates

Now, a rate and term refinance should result in the least amount of default risk because the borrower is likely reducing their monthly payment in the process.

This happens via a lower interest rate and possibly a lower outstanding balance (paid down since origination) spread out over a brand-new loan term.

That leaves us with home purchase loans, which you’d think would be less risky than a cash out refinance, but not as risky as a rate and term refinance, since it’s ostensibly a first-time home buyer or someone in a new property.

If you were the bank, you’d probably want to give a new, cheaper loan to the seasoned homeowner who has been paying their mortgage for years as opposed to the first-time buyer or even a move-up buyer taking on more debt.

But for one reason or another, some banks and mortgage lenders offer the lowest mortgage rates on home purchase transactions.

The Lowest Mortgage Rates Are Offered on Home Purchase Loans

The reason boils down to DATA. Despite the fact that the actual loan characteristics (such as FICO score, LTV, and DTI) would indicate the lowest default rates on rate and term refinances, it is purchase loans that perform the best.

One possible reason why is because of faulty appraisals on refinances, which perhaps overvalue properties.

Regardless, purchase mortgages default the least, followed by rate and term refinances, and finally cash out refinances, the last of which actually makes sense.

Interestingly, the loan characteristics also indicate that cash out refis and purchase mortgages should default at about the same rate, yet they are priced the furthest apart.

And again, that’s because in real life, not expected default rates, purchase loans default the least and cash out refis default the most.

Lowest: Home purchase rates
Slightly Higher: Rate and term refinance rates
Highest: Cash out refinance rates

So when you compare mortgage lenders, you might often find that purchase rates are the cheapest, followed by rate and term refi rates, and finally cash out mortgage rates.

There’s no question cash out refinances cost the most – this is the norm amongst all banks and lenders to my knowledge.

But not all banks/lenders offer different rates for purchases and rate and term refis.

How Much More Expensive Are Refinance Rates?

  • Big banks tend to advertise higher refinance rates vs. purchase rates
  • Some lenders don’t differentiate between purchase rates and rate and term refi rates
  • Or simply charge slightly higher closing costs on refinance transactions
  • Rates may be .25% to .375% higher on refis but pay attention to points charged and loan assumptions

I looked around and found that Chase, Citi, and Wells Fargo offer lower home purchase rates, while Quicken Loans offers the same exact rates for purchases and rate and term refis.

Quicken even says this in their fine print: “Based on the purchase/refinance of a primary residence with no cash out at closing.”

In other words, a purchase or rate and term refi are priced the same.

Clearly this matters when shopping around for a mortgage, so take notice of who is charging more/less for certain transaction types and choose accordingly.

One last thing – pay attention to the assumptions lenders make when they list their rates. It could also be that you’re not comparing apples to apples, if there are different loan amounts, LTVs, credit scores, mortgage points, and so on.

But know refinance rates are higher because they default more than purchase loans, and that requires a higher price to compensate for heightened risk, plain and simple.

Source: thetruthaboutmortgage.com

Posted in: Mortgage Rates, Mortgage Tips, Refinance, Renting Tagged: 2, 30-year, About, actual, All, Appraisals, assumptions, balance, Bank, banks, best, big, Buy, buyer, Caliber Home Loans, chase, Citi, closing, closing costs, cost, Credit, credit scores, data, Debt, DTI, equity, existing, expensive, fico, fico score, Financial Wize, FinancialWize, first-time home buyer, fixed, home, home buyer, home equity, home loan, home loans, home purchase, Homeowner, in, interest, interest rate, Leaders, lenders, Life, list, loan, loanDepot, Loans, LOWER, Main, Make, money, More, Mortgage, mortgage lenders, mortgage payment, mortgage points, MORTGAGE RATE, Mortgage Rates, mortgage refinance, Mortgage Tips, Mortgages, Move, new, offer, offers, or, Origination, Other, points, price, property, Purchase, Purchase loans, Q&A, rate, Rates, Real Life, Refinance, rise, risk, save, second, shopping, simple, time, Transaction, united, United Wholesale Mortgage, value, wants, wells fargo

Apache is functioning normally

June 9, 2023 by Brett Tams

At least not yet…

As you probably know, the Fed slashed the federal funds rate to near-zero yesterday afternoon to prop up the economy as it contends with the growing coronavirus pandemic.

If you read the headlines, you might falsely assume the Fed just slashed mortgage rates by a full percentage point.

Combined with the half-point cut two weeks ago, you might be led to believe that mortgage rates are now truly rock bottom.

But in reality, those actions had nothing to do with consumer mortgage rates.

Those rate cuts were intended to help banks borrow from one another to ensure they maintain minimum reserve requirements.

When that key rate is lowered, the money supply rises and lending to businesses and consumers increases, thereby spurring economic activity.

That’s the whole point.

Didn’t the Fed Just Lower Mortgage Rates?

  • The Fed rate cuts have no direct impact on mortgage rates
  • They can serve as a guide for long-term rates, but the federal funds rate isn’t your mortgage rate
  • Your mortgage rate didn’t just drop by 1%
  • But the MBS buying program known as QE4 should lead to lower mortgage rates for consumers over time

Ok, great, so how does this affect mortgage rates?

Well, the Fed also announced the purchase of at least $200 billion in agency mortgage-backed securities (QE4), which is intended to bring down mortgage rates.

However, and this is a biggie, long-term fixed mortgage rates weren’t anywhere close to zero when they announced the news.

They actually hit record lows two week ago, which set off a refinance frenzy, and in turn caused an oversupply in the market.

Simply put, mortgage lenders were over capacity, and when there’s too much supply and not enough demand, prices must be adjusted.

In the case of mortgage rates, prices went up to stem demand.

This phenomenon is also driven by the fact that most mortgage lenders bundle and sell off their mortgages almost immediately after origination to investors.

If there are too many of these bundles of mortgages, known as mortgage-backed securities (MBS), floating around, prices must go down.

Or, mortgage rates must go up to make them more attractive to investors seeking higher yields.

And that’s why mortgage rates shot up after hitting record lows.

It also explains why the Fed took direct action to buy MBS, which will level the supply/demand imbalance.

In short, the Fed has agreed to be a major buyer of MBS, allowing mortgage lenders to lower mortgage rates again.

When Will Mortgage Rates Fall to 0%?

  • Mortgage rates probably won’t ever go to 0% or anywhere close
  • Despite European banks offering 0% rates or even negative rates
  • The Fed’s QE4 program should stabilize and lead to lower mortgage rates
  • Whether they return to record lows depends on what else goes on in the world over the next several months

Now remember, mortgage rates weren’t anywhere near 0% last week.

In fact, many lenders had raised rates so rapidly that the near-3% 30-year fixed rates were now actually closer to 4%.

If you’ve been following mortgage rates recently, you’ll know that a 4% 30-year fixed mortgage rate is nothing to get excited about.

Not only does it feel very average, it probably is high to a lot of homeowners. And it’s not just emotional.

There are plenty of homeowners out there with sub-4% interest rates, so for these millions of borrowers, there will be no financial incentive to refinance.

When lenders collectively raised rates last week, they effectively reduced the refinanceable population by millions of individuals.

The good news is that should also work to limit MBS supply, and when coupled with the Fed buying MBS, push mortgage rates lower.

The problem is mortgage rates are nowhere close to zero, as they are in European countries, where they are even being offered below zero (negative rates).

So really, the Fed’s move is intended to keep the secondary market for mortgages intact, first and foremost.

To ensure that mortgage rates don’t rise further, crushing an industry that seemed primed for a windfall.

In other words, the first step here is stabilizing mortgage rates and erasing some of last week’s damage.

The next step is trying to rally back down to the record lows seen two weeks ago.

From there, the 30-year fixed would still be perched at/above 3%, so a rate of zero or anywhere close to it would still be worlds apart.

And if you believe the head of the nation’s largest retail mortgage lender, Quicken Loans, we won’t even see 30-year fixed mortgage rates fall below 3%.

So regardless of what the Fed is doing, you might want to temper your expectations.

That being said, we could test new all-time lows eventually, but it’s probably going to take some time to play out.

Lenders have no intention of getting caught out twice, so they’ll be very hesitant to lower rates significantly at the moment.

If we’re able to resolve the coronavirus in the meantime, that could actually work against interest rates, assuming the economic damage is less than what’s baked in and we get back into gear.

In summary, yesterday’s Fed announcement is excellent news for mortgage rates, but it’s going to take time and favorable conditions for mortgage rates to even get back down to 3% again.

Source: thetruthaboutmortgage.com

Posted in: Mortgage News, Mortgage Rates, Renting Tagged: 30-year, 30-year fixed mortgage, About, action, All, Announcement, average, banks, Borrow, borrowers, Buy, buyer, Buying, Consumers, coronavirus, Economy, expectations, Fall, fed, fed rate, Federal funds rate, Financial Wize, FinancialWize, fixed, funds, good, great, guide, homeowners, impact, in, industry, interest, interest rates, investors, lenders, lending, Loans, LOWER, Make, market, MBS, money, More, Mortgage, mortgage lender, mortgage lenders, Mortgage News, MORTGAGE RATE, Mortgage Rates, Mortgages, Move, new, News, or, Origination, Other, pandemic, play, Prices, Purchase, rate, Rates, Refinance, retail mortgage, return, rise, Secondary, secondary market, securities, Sell, short, The Economy, the fed, time, will, work

Apache is functioning normally

June 8, 2023 by Brett Tams

With significant increases in mortgage rates and application volumes, 2022 is already showing us the effects of the Federal Reserve’s expedited tapering plan. Things are moving fast, so let’s get right into this week’s update with the latest mortgage industry news.

Rates Update

In the week ending January 13, Freddie Mac reported some of the largest average mortgage rate increases in recent months. According to Freddie’s PMMS, loan products across the board showed increases of upwards of 0.2 percent – bringing rates to their highest since early 2020. Our predictions:

  • Refinance opportunities could be disappearing. Should mortgage rates continue to increase, the window to refinance at a lower rate will subsequently close. Acting sooner than later will benefit you in the long run, so be sure to contact your Total Mortgage loan officer to get started.
  • Mortgage application volume will increase. On January 12, the Mortgage Bankers Association (MBA) reported a 1.4 percent increase in mortgage applications from the week prior; this increase will likely continue in the coming weeks as buyers take advantage of the market before further rate hikes.

As always, we’ll continue to keep you updated as the market develops and mortgage rates shift. The Federal Reserve’s next meeting on January 26 will likely shed more light on the above as we close out the month. For now, contact us if you have any concerns or are ready to lock in a rate before they continue to rise.

Older, but Still Important News

Even with this recent spike in mortgage rate numbers, let’s not forget about older news that will still hold prominence in the months to come.

Earlier this month, the Federal Housing Finance Agency (FHFA) announced upcoming fee increases for certain Fannie Mae and Freddie Mac home loans. Effective April 1, 2022, upfront fees for these options will have the following increases:

  • Upfront fees for high-balance loans will increase between 0.25 and 0.75 percent.
  • Upfront costs for second home loans (non-primary residence) will increase between 1.125 and 3.875 percent.

These increases will ultimately depend on each product’s loan-to-value ratio. “High-balance” loans qualify as any that go above the conforming baseline limit introduced on January 1 – more information on that below.

At the start of the month, the borrowing limits for Conventional and Federal Housing Administration (FHA) loan options saw significant increases to help buyers combat rising market prices. The conforming limit for single-unit home loans is now $647,200 – an 18.05 percent increase from last year’s limit. To learn more about these changes and your new borrowing options, get in touch with your Total Mortgage loan officer.

In Closing

Despite everything, the market is still in a favorable place for buyers – but for how much longer? Even in the face of Omicron concerns, mortgage rates are rising and are only expected to continue doing so throughout the year. If you’ve been waiting for the perfect rate, now may be one of your last chances to lock it in; contact us to get started and stay tuned for next week’s Mortgage Monday update!

Source: totalmortgage.com

Posted in: Refinance, Renting Tagged: 2, 2022, About, Administration, Applications, average, balance, before, borrowing, buyers, closing, Fannie Mae, Fannie Mae and Freddie Mac, Federal Housing Finance Agency, Federal Reserve, Fees, FHA, FHFA, Finance, Financial Wize, FinancialWize, first-time home buyer, Freddie Mac, get started, hold, home, home loans, Housing, housing finance, in, industry, Industry News, Learn, loan, Loan officer, Loans, LOWER, market, MBA, More, Mortgage, mortgage applications, Mortgage Bankers Association, mortgage industry news, mortgage loan, mortgage monday, MORTGAGE RATE, Mortgage Rates, Moving, new, News, or, percent, place, plan, PMMS, predictions, Prices, PRIOR, products, rate, Rate Hikes, Rates, ready, Refinance, right, rise, second, second home, single, update, value, volume, will

Apache is functioning normally

June 8, 2023 by Brett Tams

The mortgage space is unique from a lot of other businesses in that the customer isn’t always right.

And special offers are typically few and far between. This is mostly because of the complexities involved with closing a home loan.

For example, it’s pretty easy to find a promo code when booking a hotel, or snag a sign-up bonus for opening a credit card.

But when it comes to a home loan, you typically aren’t offered much other than perhaps speedy service, or a money-back guarantee if things go wrong and it’s entirely their fault.

Price-matching is also pretty hard to come by, though Chase has just launched such a deal.

Get $200 If Chase Can’t Match or Do Better

In honor of National Homeownership Month, Chase has rolled out some new offerings in their home loan department.

This includes homebuyer education resources, a Closing Guarantee, and as mentioned, a price-matching pilot program.

The way it works is fairly straightforward – Chase will give home buyers $200 if they can’t match or beat a competing loan offer.

To be eligible, you need to complete an initial purchase loan application with Chase by September 30th, 2023.

And you must provide an official Loan Estimate (LE) from another licensed lender that includes the same loan term, purpose, product, and loan type.

Assuming Chase can’t match or beat it, they’ll provide you with $200 within 30 days of withdrawal of the Chase application.

At the moment, this is only available to customers purchasing properties in the states of Arizona and Ohio.

And the following counties in Texas: Austin, Brazoria, Chambers, Fort Bend, Galveston, Harris, Liberty, Montgomery, and Waller.

It’s also only valid for customers who hold an active Chase personal deposit account opened on or before May 1st, 2023.

Your loan scenario has to be pretty vanilla, meaning no investment properties, 2-4 unit properties, second homes, home equity loans or second mortgages.

Chase $5,000 Closing Guarantee and Lock and Shop

Aside from the new price match offer, Chase has a Closing Guarantee that provides $5,000 if they’re unable to close a home purchase loan on time.

As always, you need to hold up your end of the bargain by getting income/asset documents and signed disclosures to Chase in a timely fashion.

And the contract closing date must be at least 21 calendar days after receipt of a completed home loan application for conventional loans (30+ for FHA/VA).

Of course, delays caused by third parties or due to force majeure events won’t result in compensation.

This is kind of one of those things where if you’re using Chase anyway, keep an eye on it as you might be compensated if they don’t close on time.

Additionally, Chase launched a new “Lock and Shop” option that lets you lock in your mortgage rate for 90 days before finding a home to buy.

That way you have assurances that your mortgage payment won’t go up if mortgage rates unexpectedly rise during the home search.

And there is no upfront fee for this option when using Chase Homebuyer Advantage, which is their conditional letter of approval you can obtain upfront.

You get 60 days to find a property to purchase, and a one-time float down option will be available if mortgage rates improve during that time.

This can be combined with the Closing Guarantee as well.

Chase Offering Grants of $2,500 and $5,000 in Select Areas Nationwide

Lastly, you can search for down payment assistance and other grants via Chase’s Homebuyer assistance finder.

Simply enter an address and it will show you matched programs that might be available.

In select areas, the Chase Homebuyer Grant provides $2,500 or $5,000 toward a new home purchase.

The company notes that a $5,000 grant is available to eligible home buyers purchasing a property in majority-Black and Hispanic neighborhoods throughout the United States.

Chase was the fourth largest mortgage lender in the U.S. in 2022, per HMDA data. They funded about $99 billion in home loans last year.

Only three lenders originated more mortgages, including United Wholesale Mortgage (UWM), Rocket Mortgage, and Wells Fargo.

As always, be sure to look at the big picture when comparing mortgage offers. This includes the interest rate, lender fees, and the company’s overall competency and service.

Source: thetruthaboutmortgage.com

Posted in: Mortgage News, Renting Tagged: 2, 2022, 2023, About, active, Arizona, asset, Austin, before, bend, big, Big Picture, black, bonus, Buy, buyers, chase, closing, company, Compensation, Conventional Loans, Credit, credit card, data, deposit, down payment, Down Payment Assistance, education, equity, events, Fashion, Fees, FHA, Financial Wize, FinancialWize, Finding a Home, force majeure, Hispanic, HMDA, HMDA data, hold, home, home buyers, home equity, Home equity loans, home loan, home loans, home purchase, home search, homebuyer, homeownership, homes, in, Income, interest, interest rate, investment, Investment Properties, lenders, loan, Loans, money, More, Mortgage, mortgage lender, Mortgage News, mortgage payment, MORTGAGE RATE, Mortgage Rates, Mortgages, neighborhoods, new, new home, offer, offers, or, Other, parties, Personal, pilot, pretty, price, price match, programs, property, Purchase, rate, Rates, right, rise, search, second, second homes, second mortgages, september, space, states, texas, time, unique, united, united states, United Wholesale Mortgage, UWM, VA, wells fargo, will, withdrawal, wrong
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