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What May Impact Mortgage Rates this Week: May 20, 2013
There was no economic data released today or scheduled for Tuesday.
On Wednesday, we'll have the minutes from the last Fed meeting which may cause rates to move based on the clues found in the minutes and how bond traders interpret them.
Here are the economic indicators scheduled to be released this week:
Wednesday, May 22: Existing Home Sales; FOMC Minutes
Thursday, May 23: Initial Jobless Claims; New Home Sales
Friday, May 24: Durable Goods Orders
Don't forget, Monday, May 27, 2013 is Memorial Day and most offices will be closed.
Mortgage rates are still historically very low... however over the past couple weeks, they have been trending higher.
Today I quoted 3.750% (apr 3.828) for a 30 year fixed rate priced at "par" (0.141% in discount points - no origination points) based on a sales price of $500,000 with a 20% down payment and credit scores of 740 or higher. The principal and interest payment for this Seattle area home buyer is $1,852.46.
If you would like me to provide you with a mortgage rate quote for a home located anywhere in Washington state, click here.
Pardon me!
I'm in the process of moving my blog to a new host. We're experiencing a few hiccups and should be back to "normal" soon.
Thank you!
What is the difference between a Preapproval Letter and a Loan Commitment Letter?
Last week I shared how it's pretty much mandatory that if you are a home buyer making an offer on a home located in the greater Seattle area, you better be equipped with a strong preapproval letter from a reputable lender.
Some home buyers are taking this a step further and requesting a Loan Commitment Letter from their lender. What's the difference?
There are actually three levels of qualifications that a potential home buyer may have after contacting a lender. Please keep in mind that not all lenders may have the same standards or definitions as what I'm posting here.
Prequalifed means that the borrower has talked with a lender and they have reviewed information. The borrower may have only verbally provided information to the lender to see if the borrower is "qualified" to buy a home at a certain price range or loan amount. The credit report may or may not be obtained at this point. This is a preliminary stage in the home buying process. A prequal letter is very quick to prepare and provide to a borrower.
A lender may issue a "prequal letter" if the borrower has not provided all supporting documentation required to be considered "pre-approved".
A borrower is preapproved once they have provided all supporting documentation to back up or support what was determined at the pre-qual stage. If a borrower is preapproved, the lender has pulled their credit and addressed any potential issues, has ran the loan through automated underwriting (AUS) and has obtained the items required per the "findings" from the AUS response. The borrower is providing all necessary income and asset documentation to the lender.
Once the lender has the required items, they will prepare a preapproval letter based on the borrowers financial scenario and what they are intending to offer on the home. A preapproval letter is often prepared by the loan officer and does not mean that an underwriter has reviewed the loan application. NOTE: when I have a unique scenario with a borrower, I will have an underwriter review the scenario before I issue a preapproval letter.
A preapproval letter may be issued quickly, depending on how soon the borrower can provide their supporting documentation and how complicated their scenario is.
A "loan commitment letter" means that not only has the applicant preapproved, an underwriter has reviewed the application and the letter will include all conditions to the loan approval. The lender is committing to lend to the borrower per the terms stated in the commitment letter. A loan commitment letter may take a longer to prepare as it requires an underwriter to review the application and supporting documentation.
Often times, when a borrower wants or requires a commitment letter, we will begin with a preapproval letter with the commitment letter following once we receive the underwriters approval.
All three letters, prequal, preapproval and loan commitment letter, are subject to property conditions, such as the title report and the appraisal. They are also subject to market changes, such as interest rates or possible program changes (until the loan or program is locked). Of course the letters are also subject to any changes the borrowers may make from what was used on their application, such as changes to employment, income, assets, debts or credit scores.
I cannot stress enough how important it is for potential home buyers to start the loan approval process early. If you're considering buying a home located anywhere in the beautiful state of Washington, where I'm licensed, I'm happy to help you!
What May Impact Mortgage Rates this Week: May 13, 2013
Mortgage rates, although still very low, are trending higher this morning following stronger than expected Retail Sales data and concerns over the Fed ceasing QE3 sooner than expected. In addition, the stock markets have been reaching new highs which typically translates to higher mortgage rates as investors trade the safety of bonds (like mortgage backed securities) for the potentially higher return found in stocks. Currently mortgage rates are about 0.125% higher in rate than where they were on Friday evening.
Here are a few of the economic indicators scheduled to be released this week:
Monday, May 13: Retail Sales
Wednesday, May 15: Producer Price Index (PPI) and Empire State Index
Thursday, May 16: Consumer Price Index (CPI); Housing Starts; Initial Jobless Claims; Building Permits; and Philadelphia Fed Index
Friday, May 17: Consumer Sentiment (UoM)
When QE3 ends and the Fed discontinues their bond buying program which has been keeping mortgage rates artificially low, we will see mortgage rates trend higher. It's estimated that rates will be closer to what non-conforming/jumbo rates currently are.
If you're interested in a rate quote for your home located in Burien, Bothell, Bellingham or anywhere in Washington state, where I'm licensed, click here.
Is it necessary in Seattle to get preapproved to make an offer on a home?
Recently one of my out of state clients who is looking to buy an investment home in Seattle asked "Is it necessary in Seattle to get preapproved?"
The short answer: YES! Unless you're paying cash! And if you are paying cash, be prepared to show the listing agent and seller that you have proof of funds.
Redfin's "Bidding War Report" reveals Seattle is the 5th most competitive housing markets in the nation with 74.6% of offers "facing competition" (multiple offers) last month.
With Seattle area home sellers having more than just one offer from potential home buyers to choose from, you must be preapproved by a reputable local lender. Listing agents will help the seller review the offers to determine which one is the best for their situation.
According to the Bidding War Report, if you're buying a home in Seattle, you may want to consider getting your home inspection done BEFORE making your offer (aka a "pre-inspection"). Last month, 14.3% of "winning offers" on Seattle homes had pre-inspections and 19% waived their inspection contingency.
Pre-Inspect-to-Play: This 2-bedroom, 1-bath home in Seattle’s Phinney Ridge neighborhood had 300 showings, 19 pre-inspections (a competitive strategy common in Seattle in which the buyer has the home inspected before submitting an offer so that they can safely waive the inspection contingency), and more than 30 offers....
What did the "winning offers" have for financing in Seattle last month?
- 63.1% used conventional financing
- 4.8% used FHA or VA financing
- 2.4% paid cash
10.7% of "winning offers" waived their financing contingency. 17.9% of "winning offers" included a cover letter, or a "love letter" to the seller about why they want to buy their home.
This is great news for home owners who have been contemplating selling their home. Last night, King 5 aired this story about a couple from Seattle who sold their home in a matter of days for more than they expected with several strong offers to choose from.
Rising home prices will also help home owners who have been waiting for their home values to go up so they can refinance (if they don't already qualify for HARP or a FHA/VA streamline refi).
ATTENTION HOME BUYERS is the greater Seattle area: you've got to get your game on if you want to "win" in a multiple offer situation! Be sure to get preapproved from a local trusted lender. Your preapproval letter needs to be strong enough to give the seller and listing agent confidence that you are the most qualified buyer with the highest odds of having the transaction close quickly and without issues. Here's a list of what you'll need in order to be truly preapproved...if you're working with a lender who has not requested these items, you're probably just prequalifed and there is a HUGE difference.
If you are considering buying or refinancing a home located in Seattle or anywhere in Washington state, where I'm licensed, I am happy to help you! I have been helping home buyers with their mortgage needs at Mortgage Master Service Corporation for 13 years. Click here for a rate quote or contact me to start the preapproval process.
HARP 3.0 Update
Insider Mortgage Finance recently posted this teaser indicating that President Obama is pushing for the eligibility dates for HARP 3.0 to be expanded.
"The Obama administration has sent a message to the mortgage industry that it wants to expand the Home Affordable Refinance Program by changing the eligibility date for high loan-to-value and underwater borrowers who want to refinance loans financed by the government-sponsored enterprises. According to members of the Mortgage Bankers Association who attended a recent pow-wow at the White House, the administration wants to push the eligibility date for HARP into mid-2010 or so"
I say "teaser" because in order to read the full article, you need to $ubscribe.
The odds of HARP 3.0 becoming a reality may be better should President Obama's nomination of Representative Watt to head the FHFA become a reality.
Currently many home owners who had their mortgage securitized by Fannie Mae or Freddie Mac June 1, 2009 or later have not been eligible for a Home Affordable Refinance (HARP).
HARP allows home owners who have lost equity and who would otherwise qualify, to refinance at today's very low interest rates.
Having the securitization date expanded (if not removed completely) would be of great relief to many Washington state home owners.
Stay tuned!
Mortgage Rate Update for the Week of May 6, 2013
This week's calendar is looking a little light as far as scheduled economic indicators which may influence the direction of mortgage interest rates.
Thursday, May 9: Initial Jobless Claims
Wow.... that was exciting! 
On Tuesday, the Treasury will begin to sell $27 billion in notes and bonds which may impact mortgage rates as they are based on mortgage backed securities (bonds).
Remember, you can follow me on Twitter @mortgageporter or on Facebook to trending information about mortgages. Of course you can always subscribe to my blog too. You can unsubscribe at any time.
If you are interested in refinancing or buying a home (primary, second home or investment property) in LaConner, Langley, Lynnwood or anywhere in Washington state, where I'm licensed, I'm happy to help you. Click here for a mortgage rate quote.
Why is the Jobs Report so important to mortgage rates?
Typically on the first Friday of every month, the Bureau of Labor Statistics releases the Employment Situation Summary, otherwise known as The Jobs Report. This report details specific employment trends, including how many Americans are employed with "non-farm" jobs, trends in various fields of employment, income and hours worked. It also includes the "official" unemployment rate. The data contained in the Jobs Report carries a lot of weight and is considered one of our country's stronger economic indicators.
Often times, the data from the Jobs Report may impact mortgage rates different than one would think. A strong Jobs Report, showing jobs added or wages increasing may translate to wage inflation. Inflation tends to negatively impact bonds, like mortgage backed securities, and may cause rates to trend higher. The reverse is also true, a weak Jobs Report may cause mortgage rates to improve as investors seek the safety of bonds.
The Jobs Report is so important that the Fed has tied their economic stimulus participation (such as buying mortgage backed securities/bonds to keep mortgage rates artificially low) to the unemployment rate. The Fed has indicated they will continue with the current policy until the unemployment rate is below 6.5%. Once the Fed stops buying mortgage backed securities, keeping rates artificially low, you will see mortgage rates trend dramatically higher. Some suggest our current conforming rates would be more in line with non-conforming/jumbo rates.
This morning's Jobs Report
This morning the Jobs Report was released with data coming in stronger than anticipated with employers adding 165,000 jobs vs. the 155,000 expected for April. Positive revisions totally 114,000 were made to March and February's reports. This is causing mortgage rates (although still very low) to trend higher.
The unemployment rate is at 7.5%.
As I write this post (8:15 am), the DOW is up 170 at 15,001. Remember, when stocks are rallying, mortgage rates tend to trend higher too as investors will trade the safety of bonds (like mortgage backed securities) for a potentially better return.
How are mortgage rates?
Here are a few rate quotes effective as of May 3, 2013 as of 8:30 am. Mortgage rates change often, sometimes several times a day. Click here for your current rate quote for your home located in Washington state.
As I mentioned, mortgage rates are still very low. However we could see rate changes for the worse as MBS are being hit hard this morning. With that said, here are rates for this morning based on a sales price of $500,000 with a loan amount of $400,000, purchase in Seattle.
3.500% 30 year fixed conventional (apr 3.563%). I priced this as close to "par" as possible - meaning with as little discount points or rebate credit as possible. If you really want your rate priced with a discount point, 0.859% will buy you just 0.125% better in rate: 3.375% (apr 3.437%).
2.750% 15 year fixed conventional (apr 2.857%) priced close to par. Currently, a point (1.024%) will buy you a quarter point reduction in rate for this sceanrio: 2.500% (apr 2.605).
Think you're only going to live in your home for 10 years or less? You may want to consider a 10/1 adjustable rate ARM.
2.625% 10/1 ARM conventional (apr 2.933%). Your principal and interest will be fixed at $1606.60 for 120 months (10 years). At the 121st month, the rate can go up as high as 7.625% (5% first adjustment cap i.e. the "ceiling") or go as low as 2.25% (the "floor"). The rate will then adjust annually on the anniversary date of the first adjustment by a maximum of 2% (limited by the floor and ceiling - never higher than 7.625% and never lower than 2.25%).
I have so many other programs available for your refi or home purchase needs. My team and I are happy to help you with your mortgage for homes located anywhere in Washington state, where I'm licensed to originate mortgages.
Reader Question: Can Closing Cost be financed with a VA Loan?
I received this email from one of our subscribers:
"...with a VA mortgage, can you finance buyer closing costs in excess of the purchase price (e.g. not ask for seller financing contributions, but just borrow them in excess of the purchase price)"
With a VA mortgage, the buyers closing cost cannot be financed, with exception to the VA funding fee, regardless of the appraised value.
The VA loan amount is limited to the purchase price, appraised value or VA county loan limit (or VA jumbo loan amount)*, whichever is less.
*NOTE: VA does not set actual loan limits on counties. They do set a limit as to their maximum guarantee (meaning zero down financing). In the greater Seattle/King-County area, the loan limit for zero down financing is currently $500,000. Click here for a complete list of VA loan amounts per county. VA loan amounts exceeding $500,000 in the Seattle/King County area are considered VA Jumbos and will require some down payment depending on the difference between the sales price and county loan limit.
USDA loans, on the other hand, will allow for buyers closing cost to be financed IF the appraised value is higher than the sales price. The loan amount is limited to the appraised value and must be applied to bona fide closing cost.
USDA loans are also zero down programs and are only eligible in specific designated rural areas, like Snoqualmie, Carnation or Duvall, and to borrowers who meet certain household income limits.
Sellers can contribute towards closing cost for both of these mortgage programs and currently, low mortgage rates are often paired with enough rebate pricing to cover a majority of the closing cost.
Thanks for your question!
The Fed to continue keeping mortgage rates low
The Fed just wrapped up their two day meeting and have issued their press release. Here are the tid-bits relating to keeping mortgage rates at artificially sweet and low levels.
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agenc mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.
The Committee will closely monitor incoming information on economic and financial developments in coming months. The Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes. In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives.
As expected, there was no change to the Fed Funds rate.
If you would like to lock in a sweet and low mortgage rate for your home purchase or refinance for homes located in Washington state, please contact me.
