Here are FOUR SIMPLE QUESTIONS YOUR LENDER ABSOLUTELY MUST BE ABLE TO ANSWER CORRECTLY. IF THEY DO NOT KNOW THE ANSWERS.RUN.DON'T WALK. RUN.TO A LENDER THAT DOES!
1) What are mortgage interest rates based on?
The only correct answer is Mortgage Backed Securities or Mortgage Bonds, NOT the 10-year Treasury Note. While the 10-year Treasury Note sometimes trends in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions. DO NOT work with a lender who has their eyes on the wrong indicators.
2) What is the next Economic Report or event that could cause interest rate movement?
A professional lender will have this at their fingertips.
3) When Bernanke and the Fed "change rates", what does this mean. and what impact does this have on mortgage interest rates?
The answer may surprise you. When the Fed makes a move, they can change a rate called the "Fed Funds Rate" or "Discount Rate". These are both very short- term rates that impact credit cards, Home Equity credit lines, auto loans and the like. On the day of the Fed move, Mortgage rates most often will actually move in the opposite direction as the Fed change. This is due to the dynamics within the financial markets in response to inflation. For more information and explanation, just give us a call.
4) Do you have access to live, real time, mortgage bond quotes?
If a lender cannot explain how Mortgage Bonds and interest rates are moving in real time and warn you in advance of a costly intra-day price change, you are talking with someone who is still reading yesterday's newspaper, and probably not a professional with whom to entrust your home mortgage financing. Would you work with a stockbroker who is only able to grab yesterday's paper to tell you how a stock traded yesterday, but had no idea what the movement looks like at the present time and what market conditions could cause changes in the near future? No way!
Be smart... Ask questions. Get answers!
More than likely, this is one of the largest and most important financial transactions you will ever make. You might do this only four or five times in your entire life. but we do this every single day. It's your home and your future. It's our profession and our passion. We're ready to work for your best interest.
If you have any addition questions, feel free to contact me.
I wish I had a crystal ball--(don't we all!) In a meeting in our office yesterday; our mortgage broker was quoted as predicting the rates would fluctuate throughout the year from 6% to probably 7.5%--she said that during the past day they've risen and fallen 1/2 a point within 2 hours. If you are considering buying-now is the time.
â€œThe spread between mortgage and Treasury yields continues to astound. 30-year mortgages finished the week nearly 3.00% higher than equivalent Treasuries. To put that number in perspective, consider that the spread reached a mere 2.30% when the Fed was battling recession in the early â€˜Nineties and again when Long-Term Capital imploded in the late â€˜Nineties. The spread hit 2.80% earlier this decade when Greenspan raised deflation fears and was driving short-term rates to 1.00%. Todayâ€™s spread of 3.00% is truly historic, and is well above the long-term average of 1.50%. Watch closely, because when short-term rate volatility subsides, mortgage rates are likely to compress quickly towards Treasury yields.
Inflation fears continue to roil the markets. Core CPI prices were higher than expected in January, which put the market on the lookout for inflation pressures outside of the energy and food complexes. Fed-funds futures reversed course somewhat, and expectations for dramatic Fed rate cuts lessened. A 0.25% cut (to 2.75%) is widely expected in March, but futures no longer predict funds below 2.00% for later this year. Also reversing recent trends, the yield curve flattened as short-term yields rose more than long-term yields. The spread between ten-year and two-year Treasuries finished the week slightly lower at 1.78%.
Jumbo fixed-rate prices continue to muddle along, about 2 Â½ points behind conforming prices. Pricing for the new, temporary agency jumbo loans is not yet known. In related news, Fannie Mae and Freddie Mac will announce earnings on Wednesday and Thursday respectively.â€
With the new FHA conforming limits it will make buying a house a lot easier, it wont make things easier for everyone who is upside down in their houses. The truth is that no one knows... You can speculate all you want but good luck. Watch the 10 year bond market as a good indicator for 30 yr fixed rates. 3, 5, 7 year arms are doing a lot better than the 30 yr fixed. It's just what the investors are buying right now.