In the very near term we will continue to see inconsistency in mortgage rate behavior—at times on a moment-by-moment basis. Some of the big lenders have pulled back altogether by eliminating certain products from their portfolio (i.e., Wells Fargo is no longer offering cash out refinances on jumbo loans and many banks are setting the minimum FICO score at 680 or higher, ours included). Those moves are significant and tell a much bigger story about what is happening in the mortgage market right now.
Traditionally, when we see stocks suffer, bonds rally and that tends to lead to lower mortgage rates. That’s not happening now, in part, because of the concerns over the solvency of the mortgage loan servicing industry. If you haven’t read this article, I re-published from the one of the mortgage market gurus, Barry Habib and his son, Dan, I would strongly recommend that you do. They break down the market break-down in a way that makes what is happening easy to understand.
To be sure, things are a long way from normal, but at least lenders moved rates in logical directions based on market movement. Our bank is among those making the right moves for not only their business but also the industry and ultimately, you.
I want to share a few things with you that I picked up from some of my colleagues and the good folks over at Mortgage News Daily. Please consider these as you work to navigate the mortgage market as a homeowner or potential buyer (and feel free to share this with anyone you think my benefit or be interested in this content):
- Mortgage rates are not tied to the Federal Funds Rates and when the Fed moved the rate to 0%, that doesn’t mean you can get a 0% mortgage. The two are not tied together. In some instances, mortgage rates have actually gone up when the Fed lowered their rate.
- If you have a home equity line of credit (HELOC) or an adjustable rate mortgage (ARM), your interest rate could be impacted by the Fed lowering their rate to 0% but there are factors that will limit how much. These loans are mostly tied to the Prime Rate, which as of today is 3.25% Check your statements to see if there has been any change to your rate.
- The low rates you see on TV or the internet are typically for one extremely specific situation—usually those with low loan amounts, high credit scores and a high percentage of equity in the property. And many times these low rates are quoted with at least 0.50 points, meaning you pay for the rate being quoted.
- If you have any risk factors in your credit profile such as; lower FICO score (above 740 is preferred), higher loan-to-value ratio (anything above 60%), loan values above $510,400 or $765,500 in “high-cost” areas (like the SF Bay Area), your rates will be higher than what you see being quoted as the lowest rates on the TV or web. The banks use these and many other variables to develop a risk profile for you and rates are based on this risk.
- If your specific situation is far outside of the rock-bottom rate cookie-cutter scenarios that the spaceship-themed and single-word lenders flash about in glitzy advertising, there may not be a loan program for you—today. This could change as the market settles down but that may be months away. Patience will be key because as I said before, I and many others in the business believe that rates will remain historically low for a while.
- Some lenders, including my bank, will not allow you to lock a loan until you’ve reached a certain milestone in the loan process. This is being done to make the costs associated with the rates being offered more predictable for the bank because of complex finance arrangements called “hedges” that provide insurance to the bank for the rates that you’ve locked. Barry Habib did a great job of breaking this down. I encourage you to read that article.
- A word on forbearance. Many see this as a “free ride”. Like many things in life, very few are actually “free”. Forbearance for those that are struggling financially due to job cuts, furloughs or reduced hours can be a lifesaver. Often though, forbearance comes with significant strings, varies from lender to lender and can cause more damage than good. Please DO NOT get a new mortgage with the intention of immediately seeking forbearance. This is the mortgage market’s biggest fear and nothing will contribute more to the crippling it. Moreover, you may be doing considerable damage to your credit and creating unnecessary roadblocks to future refinances or home purchases for yourself.
- If you need forbearance (and you just might), I strongly advise you to speak with the bank or business to whom you make your monthly payments, in order to fully understand your options. Knowing how you will get yourself out of forbearance BEFORE you go in, may save you thousands of dollars. Making an informed decision with a full understanding of the details of your forbearance is the best way to move forward. Again, if you need it, seek it but do so cautiously and with complete information.
Family Hack of the Week (Courtesy of MBS Highway)
With many schools now officially closed for the remainder of the spring and stay at home orders in effect throughout much of the country, it is understandable if kids are feeling a bit antsy. If you’re looking for some fun, online activities to do with your kids, here are two free resources for cooking together.
Every weekday at 1 pm ET, Delish’s editorial director Joanna Saltz and her kids will be cooking together on Instagram live. And no need to worry if you can’t join them live, as the videos will be saved on their Instagram feed for 24 hours. Visit @delish on Instagram to learn more, and this article to find out what they’ll be cooking each week.
Jamie Oliver’s young son, Buddy, also has a series of cooking videos on Jamie’s YouTube channel with some great options for cooking with kids. Check out the playlist here
https://www.youtube.com/playlist?list=PLcpoB2VESJme7lSxXEcXyVtFPsMI78lcL. And for more “Get Kids Cooking” options, visit https://www.jamieoliver.com/features/category/get-kids-cooking/.