Category Archives: Mortgage Rate Trends and Analysis

Commentary on mortgage rate trends

With 30-year mortgage rates falling, is it time to refinance?

lowinterestratesIn October, 30-year mortgage rates fell to levels last seen in June 2013. It all started in the week of October 16, when the bellwether rate hit 3.97 percent, according to Freddie Mac, down from the previous week’s 4.12 percent.

The decline didn’t stop there. In the following week, the rate fell to a 3.92 percent average for the week ending October 23.

Overall, for five weeks, the rate tumbled, leaving many to wonder what this can mean for homeowners. As these borrowing costs continue falling, some believe if they continue doing so, a small rise in applications for refinancing could follow.

Mark Zandi, Moody’s Analytics chief economist, recently said of that if the 30-year rate remains low, “it could spark a refi boomlet.” He added that with mortgage rates under four percent, he’d expect this to spur refinancing activity by twice as much than if rates were around 4.5 percent.

So as a homeowner, is it time to explore refinancing?

Mortgage Bankers and Clients Contact One Another

Maybe you’ve recently heard from your mortgage banker about this.

Some have been contacting their previous clients to talk about a potential refinance. In the past, maybe you didn’t qualify as you owed more than their home’s value.

Is now your time?

Christian Penner, a mortgage banker in West Palm Beach, Fla., said via the Wall Street Journal, “This may be the last time, for the 10th time, that you’ll see these rates again.” This comes on previous predictions that mortgage rates are poised to rise.

But clients have been sharing the enthusiasm as well, contacting their mortgage bankers too as they see a possible bargain.

For the week ending Oct. 17, refi applications increased 23 percent from the previous week, hitting November 2013 levels, according to the Mortgage Bankers Association (MBA).

The power of 4 percent

Aside from the falling number, some psychology could also be at play. This could have come from the magic number of four percent. Or, in this case, below four percent.

For some, this number has a certain effect and it is spurring homeowners to take action. MBA chief economist Mike Fratantoni said, “Four percent is a very important psychological level. At certain points, people who aren’t watching the markets every day get prompted to say, ’Hey, what would it look like if I refinanced?’”

But this effect may not last long.

Last year, homeowners numbering in the millions refinanced with average 30-year mortgage rate below four percent until the middle of the year. However, as the current housing market still faces tight mortgage credit, increasing home prices and stagnant incomes, this may not spur refinancing as some expect.

When is it worth refinancing?

So when is a good time?

With the falling rates, it has definitely caused a movement to refinance but time will tell if this rise continues. According to real estate data provider CoreLogic, about half of all homes that have mortgages, their rates are about 4.3 percent or less; this may not be worth it for homeowners to refinance at these lower rates. They also need to factor in fees and costs for refinancing.

If you’re pondering refinancing, look at your numbers and think about whether this would be a good thing. Economists have estimated that homeowners with rates greater than 4.25 percent would benefit from it while others see those borrowers in the 3.5 percent to 4 percent range not enduring the spike of refinancing for long.

Talk to your mortgage broker and ask plenty of questions, Think of the potential to refinance as a long-term decision rather than a short-term one. And don’t get caught jumping on the bandwagon.


Rising Mortgage Rates: Three Things To Keep an Eye On

download (2)Thanks to historically low mortgage interest rates, many have been able to live the American dream and purchase a home. Mid-September figures for the 30-year fix-rate mortgage had a national average of 4.28 percent but we all know good things come to an end.

Just as 2015 comes around the corner, many real estate professionals and economists believe this will also bring rising mortgage rates.

According to Stan Humphries, the chief economist for Zillow, the 30-year rate could reach the five percent mark by the middle of next year as the Federal Reserve discontinues their mortgage-backed security purchases.

Should rates go north, prospective homeowners may see their home-buying opportunities change. But it doesn’t have to be all doom and gloom. Here are three things for consumers to keep their eyes on should mortgage rates rise.

A cut in buying power

For most of this year, rates have sat between four to five percent, but are poised to rise around .75 percent in 2015. Borrowers will see this cut into their buying power—perhaps more than they realize.

This increase could produce higher monthly mortgage payments next year by $700-plus in the more expensive U.S. places.

In a comparison by Zillow that reviewed 35 metropolitan areas for a one percent increase in 30-year mortgages (from 4.1 percent to 5.1 percent), with rising increases for home values during the next year, monthly payments could increase for the St. Louis area to $65 per month and $200 per month for the New York metropolitan area. Over in Silicon Valley/San Jose area, there’s a possible $710 jump.

Decreased inventory

Along with spending more per month, consumers will have fewer homes to choose from when they’re ready to buy—especially hard hit will be those first-time homeowners seeking either mid- or lower-priced dwellings.

Real estate broker Redfin has July data supporting this with July property figures. They saw homes under the $375,000 range hard hit from 2011 figures as there were 28 percent less of homes in this price range and for a sticker price $130,000 or less, 50 percent fewer.

But for those seeking homes greater than a $375,000, this inventory rose 16 percent as compared to 2011.

However, when reviewing August numbers, the down trend continued. “Affordable inventory” fell by 9 percent as compared to July’s numbers.

Less competition

Sure, the two aforementioned points are concerning, but here’s one silver lining for consumers: a less competitive housing market. The National Association of Realtors recently reported in August, investors and all-cash purchase dramatically fell.

For prospective homeowners, this is a good thing according to Nela Richardson, Redfin’s chief economist. She said, “Many markets are not going to see the same multiple-bid environment that we saw even earlier this year. It will be easier to win the home of your dreams than it was a few months ago.”

Furthermore, for those first-time buyers, she believes they can take a deep breath as over the next few months as rates will remain low and they can take their time looking around.

While mortgage rates will likely change in the next year, prospective homeowners still have time to take advantage of these historic lows now. But similar to any major investment, it will be important to look at the current market, comparison shop and make an informed decision.

Mortgage Rate News for Friday, November 21, 2014

mortgage ratesSo guess what happened yesterday?  Not a whole lot.  Despite a slew of economic data that was on balance pretty decent, our markets held their ground, and mortgage rates ended the day virtually unchanged.  On the whole, mortgage rates improved a bit this week, with the average 30-year fixed-rate mortgage falling to 3.99% according to Freddie Mac’s Primary Mortgage Market Survey.  Quite honestly, I don’t have much else to say today.

Mortgage Rate News for Friday, November 14th, 2014

mortgage ratesMorning meetings have taken me away from my blogging activities the past couple days, and in the interim period, not a whole lot happened.  Mortgage rates got a little worse after Veteran’s Day, but have levelled off since that time.  Freddie Mac’s Primary Mortgage Market Survey found the average rate on a 30-year fixed-rate mortgage to be 4.01%, virtually unchanged from last week.  However, the answers to the survey are collected early in the week, and probably don’t reflect the change in pricing that resulted from Wednesday’s bond sell-off.  Effectively, the average rate is probably a couple of basis points higher.  The lowest reading we’ve seen on the PMMS this year was 3.92% on the week of October 23rd.  This morning mortgage backed securities are selling off, and we could see some deterioration in rates.

Mortgage Rate News for Monday, November 3, 2014

pmms_chart“Day after day, day after day, we stuck, nor breath nor motion; as idle as a painted ship upon a painted ocean.” -Samuel Taylor Coleridge Taylor, The Rime of the Ancient Mariner.

Once again, last week was kind of a boring one for mortgage rates.  Save for the excitement of October 15th, it’s been kind of a slow sideways grind for rates for about a month now. Last week’s Primary Mortgage Market Survey from Freddie Mac saw the average rate on a 30-year fixed-rate mortgage rise six basis points to 3.98%, putting rates a touch above 14 month lows.  From a broader perspective, rates have been trending lower for the past year (see above chart), but it’s not an extreme trend by any means.  Much closer to a sideways grind.  UPDATE: we’re seeing a sell-off in bonds this morning following some good manufacturing data.  If it is sustained, mortgage rates will tick up.

Mortgage Rate News for Friday, October 24, 2014

arrow-pointing-down-bigAfter last week’s dramatic drop, mortgage rates have continued to decline at a more sedate pace. For you, that means lows not recorded since June of 2013.

The average rate for 30-year fixed-rate mortgages fell to 3.92%, down from 3.97% last week. 15-year fixed-rate mortgages were down 10 basis points to 3.08%, and 5/1 ARMs dropped only slightly, from 2.92% to 2.91%.

Are Lenders Easing Up on Jumbo Mortgage Loan Requirements?

imagesIn today’s real estate market, lenders are hungry for borrowers who are looking to take on jumbo mortgages. As a result, some lenders have loosened their requirements when it comes to what it takes to qualify.

Underwriting is more strict than it was years ago because of new laws lenders must abide by that were passed in early 2014. But if you’re looking for a jumbo mortgage, there are some choices of lenders and options available.

What Is a Jumbo Mortgage?

A jumbo mortgage is exactly what it sounds like: a loan for larger homes that are priced at $417,000 or more in some areas. In more expensive locations, the price point for a jumbo mortgage starts at $625,500 and works up from there.

They are referred to as “jumbo” loans because they exceed the conforming limit (or max loan amount) that Fannie Mae and Freddie Mac will buy. Note that the conforming limits vary by county and market. Typically, more expensive housing markets allow for loans at $625,500 or more.

Who Is Qualifying?

It’s safe to say that several lenders are relaxing their requirements on what it takes to qualify for one of these jumbo mortgages. That said, there are still a few underwriting guidelines you should be aware of. They’re guidelines as there are no hard and fast rules across the board. The requirements can vary by lender and location when it comes to determining what a financial institution is looking for a borrower to have.

You’ll increase your chances of qualifying based on the following:

  • A debt-to-income ratio of 38-45 percent is recommended.
  • Traditionally, lenders have looked for borrowers to have a 720 credit score or better. As with any loan, the higher your credit score, the more likely you are to be approved (and with a better interest rate). Many lenders have lowered their credit requirements, so if your credit score is below 720, shop around to ensure you’re getting the best rate.
  • Lenders also like to see that you have six to 12 months of mortgage payments in reserves, which makes the loan less risky for them.
  • If you’re looking to get a jumbo mortgage for a second property, such as an investment or rental, inquire at different banks as their policies all differ on this. There are banks that will approve it.

How Lenders Are Being Lenient in Favor of Securing Jumbo Mortgages

Again, lenders are eager to start finding big borrowers as the housing market recovers. They’re willing to be more lenient if you at least meet a few of their requirements. Here are some of them, but keep in mind they change as often as the market does.

Interest rates for jumbo loans have been even lower than traditional 30-year fixed-rate mortgages for the past few months. Private mortgage insurance is also not required for many jumbo mortgages. With low interest rates, no PMI, and low down payments, it seems like now is the time to buy.

Some lenders are only requiring down payments of 10-20 percent, according to CNN Money. Lower down payments are attractive to those that can afford jumbo mortgages, as it means they will be able to invest more money elsewhere for a better return.

Even though falling property values are a big concern for lenders, the real estate markets in popular places, such as DC, New York, and San Francisco, are booming. The risk is worth it to lenders, especially since wealthier borrowers tend to default at a lower rate.

It could also be worth looking into going with a credit union for your jumbo mortgage. Credit unions are offering some of the best deals, a few going so far as to do away with down payments completely. Why? They’re in favor of building customer relationships, which means the ability to sell members on other products that they offer.

Now Is the Time to Buy

If you’re in the market for a large residential house, now might be the best time to buy. Lenders are working harder to make jumbo mortgages more attractive, and you should take advantage of it. Various lenders are in different stages of figuring out what direction they want to take with jumbo mortgages, so be diligent and shop around.

Omaha, NE Mortgage Rates and Real Estate Overview

“Put your drinks up for Nebraska,” sings Lady Gaga on her song Yoü and I. If you’ve ever been OLYMPUS DIGITAL CAMERAthere, you’ll know there’s more to America’s heartland than corn, hills and the occasional farmhouse.

Omaha has a great music scene, is one of the fastest growing cities in the country and has family friendly suburbs as welcoming as any in the Midwest. Home to five Fortune 500 companies and four Fortune 1000 companies representing the railroad, food packaging, insurance and construction industries, Omaha has a vigorous economy and is home to Warren Buffett, no less. Newsweek also listed Omaha as one of the top 10 high-tech “havens” in the nation.

Despite this, Omaha is not an especially expensive place to live. The median value of the city’s homes is currently $144,500, lower than an equivalent city such as Saint Louis. Interest rates for a 30-year fixed-rate mortgage in the area range, according to Zillow, from 4.55 percent to 4.86 percent. This results in monthly payments on an average Omaha property ranging from $586 to $603.

Whether you’re looking for a distinctive urban neighborhood like the historic Morton Meadows in midtown Omaha or a pleasant suburb like Armbrust Acres with its access to Lake Zorinsky, Omaha’s housing market has plenty of choice. Downtown Omaha has many loft units and apartment buildings, as well as proximity to the boutique shops of the Old Market Historic District.

Northwest Omaha comprises suburbs like Bennington, Irvington and Briggs, with large, affordable homes perfect for raising a family. The median sales value of Bennington homes is $235,500 and is currently increasing due to the neighborhood’s popularity. On a 30-year fixed-rate mortgage for an average Bennington property, expect to make monthly payments ranging from $941 to $969. Interest rates in the area currently stand between 4.38 percent and 4.69 percent, according to a Zillow sample.

Like any city, Omaha has rough areas. There are certainly deprived neighborhoods in the north of the city. If safety is a prime concern, stick to suburbs like Harvey Oaks to the west and Millard to the southwest of downtown Omaha. These suburbs have been popular since the 90s and are great for families. Looking for something out of town? Across the Missouri River, Council Bluffs is a small community surrounded by interesting geography with a current median home value lower than Omaha ($110,000).

Let’s hear it one more time: “Put your drinks up for Nebraska!”