November 10, 2012

WeeklyBasis: How To Lock Record Low Rates

November 10, 2012

WeeklyBasis: How To Lock Record Low Rates

Last week was a good lesson for fence-sitters, aka rate shoppers who can’t make a decision because they’re holding for lower record lows. We began the week with rates spiking on a pre-election MBS selloff. Then rates fell just as quickly for two days on a post-election stock selloff and MBS rally. Then MBS reversed again Friday, and rates crept up a bit.

This volatile up and down rate trend will continue as the Fiscal Cliff debate kicks off this Tuesday (bond/rate markets and Congress are closed Monday). Which means you have to lock the lows whenever they appear. Here’s how you do this…

You must work with your lender to do three things:

(1) set rate targets you won’t go above,

(2) completely pre-approve your loan using all income, asset, and property documentation, and

(3) lock the rates when MBS markets rally and rates dip at various intervals each trading day/week.

Steps 1 and 2 are the critical parts of this process, because locking blindly when rates dip, then figuring out the loan after almost always leads to problems with a loan approval factor that wasn’t pre-screened (even for supposedly ‘perfect’ borrowers), or with a rate lock expiring before the loan closes.

Below are rates as of Friday’s close. As the disclaimer says, lower or higher rates apply to specific borrower and property profiles.

Also below are two good links that quickly recap last week’s rate and broader financial markets.

Next up is a preview of the November 12-16 market week. Stay tuned

CONFORMING RATES ($200,000 to $417,000) 0 POINT:
30 Year: 3.375% (3.495% APR)
FHA 30 Year: 3.25% (3.37% APR)
5/1 ARM: 2.875% (2.995% APR)

SUPER-CONFORMING RATES ($417,001 to $625,500 cap* by county) 0 POINT:
30 Year: 3.5% (3.62% APR)
FHA 30 Year: 3.25% (3.37% APR)
5/1 ARM: 3.25% (3.37% APR)

JUMBO RATES ($625,501 to $2,00,000) 1 POINT:
30 Year: 3.625% (3.745% APR)
10/1 ARM: 3.125% (3.245% APR)
5/1 ARM: 2.5% (2.62% APR)

Lower or higher rates apply to specific borrower and property profiles. Lower or higher rates available using tax deductible points or zero-cost transactions. These rates assume full doc pricing on Single Family Home purchase loans for borrower with 740 FICO score or greater, at least 20% equity (unless FHA), and 6-12 months reserves left over after close (retirement assets counted at 60% of value for reserves). ARM rates adjust the first month after initial fixed period shown, and once per year thereafter until year 30. Adjusted rate calculated by adding 2.25% margin to 1yr LIBOR index at time of adjustment. At first adjustment LIBOR+margin cannot exceed start rate+5%, subsequent yearly adjustments can never be greater than 2% per year, total of all adjustments for 30yr life of loan can never exceed start rate+5%. Jumbos shown as range since they’re less market sensitive and change randomly based on lender pricing competition. Rates based on loan amount ranges shown and rates available at the time of production. Rates aren’t a loan commitment nor a loan guarantee, and are subject to change without notice.

*Conventional Super-Conforming cap = $625,500. FHA Super-Conforming cap = $729,750.
Succinct Summation Of Week’s Events (TheBigPicture)

Mortgage Rates Near Recent Lows Ahead Of Three Day Weekend (MortgageNewsDaily)