Are mortgage rates higher on Friday?

Minneapolis, MN: Everyday as a Mortgage Loan Officer, people ask me what I think interest rates are going to do, are rates higher or lower a certain time of the year, and this morning (a Friday), I was asked if mortgage rates are higher on Friday’s.

The answer is that realistically, rates do not vary because it is spring, summer, or fall. The only pattern I’ve ever been able to see is that Friday’s and extended holiday weekends lenders do tend to be the most conservative in pricing interest rates.

It simply has to do with lender exposure if the bond market moves significantly over the weekend. Most lenders are closed over the weekend, and don’t offer rates locks over the weekend. But many mortgage lenders, including us, do allow you to lock “after hours”, and over the weekend.

Overnight rate protection

The mortgage backed securities bond markets, which is essentially what determines mortgage rates closes every weekday afternoon. Whatever the market ended at, is the rate I can offer all the way up until 8:00 AM Monday.

If I write a loan and lock the interest rate at 8:00 PM on Friday, we have to honor that on Monday when our back office people actually perform the lock, even if the bond market opens worse on Monday. Multiply that out with many Loan Officers writing loans over the weekend, and lender have the potential for huge exposure risk.

To offset the risk, many lenders will hedge their rates just a bit on Friday’s or long weekends to cover themselves just in case. By doing this, they either make a hair more money if the markets didn’t change on Monday, or they prevented a loss on Monday. Either way, obviously good business practice for the lender.

mortgage rates

So Do I Lock On Friday’s

Yes, no, and maybe. There are so many factors that go into the lock an interest rate decisions. When are you closing? Next week, a month from now, or further out. What is your risk tolerance? What reports are coming out shortly that have potential to move the bond market higher or lower?

Ultimately, a good conversation with a licensed experienced Loan Officer who understands your wants, needs, and goals, and who is in tune with the markets is a great person to have on your side to help with the mortgage rate lock or float an interest rate decision.


Why smart mortgage shoppers don’t get burned, and other do.

Minneapolis, MN: I get it. You are buying a new home, or refinancing your existing home mortgage, and are looking for the best mortgage interest rate. But buyer beware, the internet is full of places to avoid.  So here I’ll give a little primer on the process, along with some common lender games, and show you why smart mortgage shoppers don’t get burned, and other do.

BASICS OF MORTGAGE LOANS

The most important shopping tool is to understand how the mortgages work, from mortgage interest rates to closing costs.

UNDERWRITING GUIDELINES

First, we all underwrite to the same guidelines. FHA loans are FHA loans, VA loans are VA loans, and conforming conventional fixed rate loans are conforming fixed rate loans regardless of where you get the loan. So one lender over the next is meaningless in terms of the vast majority of loan approvals.  Conforming conventional loan means the loan is underwritten to Fannie Mae or Freddie Mac guidelines. Conventional loan just means it is not a government backed loan.

So technically all lenders are equal – but they are not. There is something known as individual lender overlays. This is where some lenders add they own additional rules to the standard guidelines. The most common overlay is a credit score overlay. For example, FHA rules say lenders can offer the small 3.50% down payment of an FHA loan all the way down to a 580 credit score, but because of risk, many lenders will not go below a 620 credit score. So if you are a weak 585 credit score FHA loan client, one lender over another may make a difference.

MORTGAGE INTEREST RATES

Lenders don’t just make up interest rates. Calling around to a lot is just a waste of time, when shopping just a few is all that is needed to give you an idea of where the real rate market is currently at.

low mortgage interest rates

Mortgage interest rates are determined by one item, the mortgage backed security market. All lenders base daily rates off the exact same MBS bond market on the same day at the same time. If my rates go up, so does everyone else. If my rates go down, so does everyone else.  There are many factors that go into determining how the mortgage backed securities move everyday. I’ll save that for a different article.

Just understand that essentially this means we all pay the same wholesale rate for the money, and the only real difference is the margins needed by different lenders.

LENDER MARGINS

So if all lenders start at the same point, its all about the margins.  As one can expect, this means the most lean and mean company needs smaller margins, and therefore passes along the best real interest rates to consumers and still maintain a sustainable profit margin.

Fat companies, with too many layers of management, too much brick and mortar buildings to pay for, expensive all day everyday advertising, and even stadium naming rights all have to be paid for. The only way they can do that is to have higher margins, and those higher margins translate into higher mortgage interest rates for consumers.

LOAN CLOSING COSTS

This is another area of huge consumer confusion. ALL LENDERS essentially have the exact same closing costs!  How mortgage lenders, banks, and mortgage brokers present that to you can vary greatly, leading to consumer confusion.Real estate

First part of understanding closing costs is understanding the biggest percentage of closing costs are not even the lender, but rather all the other parties involved.  Appraiser, credit bureau, title companies, state taxes, county recording fees, pro-rated property taxes, home owners insurance, and more.

The actual lenders have costs too, which generally are loan origination, processing, and underwriting costs.

HIDING COSTS

If you’ve done any mortgage shopping whatsoever, you’ve gotten plenty of different interest rate and closing costs quotes. When one lender has significantly high or lower rates, or higher or lower closing costs – it generally is just about presentation.

The lower the interest rate, the higher the closing cost. The lower the closing cost, the higher the interest rate.

A common difference is many lenders will quote a rate based on you paying all normal closing costs, plus the industry standard 1% loan origination fee. Many other lenders quote without charging a loan origination fee, giving the appearance of lower closing costs. Some going as far as making silly claims, like they don’t charge that, or they will waive it “just for you.”

But deep think about that. Loan origination goes to the lender to cover the cost of originating the loan, from Loan Officers, and a significant amount of back office staff, to rent, phones, and more.  So you think they are working for free?  Of course not.

Here is how it actually works.

On most days, paying or not paying loan origination up-front equates into a 1/4% rate difference on a conforming fixed rate loan. This can vary depending on the market, but holds true most days.

Assume this two different quote example:

Lender A) A quote of a 5% interest rate on a $200,000 loan, with 1% loan origination ($2,000).

Lender B) A quote of a 5.25% interest rate on a $200,000 loan, with no origination (appears to be a $2,000 savings, but rate is higher).

Neither one of those quotes are automatically good or bad. They are just options.

If you have the up-front money today, and you are going to be in the home a long time, paying loan origination and obtaining a lower interest rate is smart. On the other hand, if you are tight on cash today, opting for lower out-of-pocket costs today by taking the slightly higher interest rate may be a good option.

I always explain these rate and cost options to my clients, but I know many mortgage companies, mortgage brokers, and banks don’t. It’s your loan, your money, your payments… You pick what is best for you – but you have to know there are options.

MORTGAGE SHOPPING TIPS TO AVOID BEING FOOLED

The first tip is education.  Reading this article has already made you smarter than most when shopping for a mortgage loan.

The rest of the tips include only using someone local. There is nothing on the internet you can’t get from the person down the street.

Avoid big banks and big internet companies with lots of overhead.

Statistically, using your local mortgage broker will always get you the best deals.

SCAM QUOTE EXAMPLES

While it is better today that it was years 15-years ago, the market is still ripe with slight of hand quoting.  I’ll give two recent example I’ve run across.

Example 1) Client was shopping standard 30-year fixed rates. Client was quoted an interest rate a full 1/2% lower than my fixed rate quote, along with no loan origination costs. Knowing that was completely impossible, but digging deeper, we discovered the other lender was actually offering a 5-year adjustable loan, but he kept saying “it’s a 30-year loan.”  Clients mind kept hearing 30-yr fixed, when it clearly wasn’t!

Example 2) A well know big internet lenders who is pretty Quick, and has Rockets. Client was looking on their web site at posted interest rates, which looked competitive to mine. Being down this road many times before, I had the client go back to their web site, but this time scroll down to the rate disclaimers. Here I showed him that while they showed the same physical interest rate, it clearly showed that to get that rate from them assumed a 75% loan-to-value loan (25% down), and would cost an additional 2.125% in points.  Each point is 1% of the loan amount.  So with the “same” mortgage interest rate, their closing costs were 2.125% HIGHER than mine.

DON’T GET BURNED BY THE SMALL PRINT!

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We lend in Minnesota, Wisconsin, and South Dakota – and we’d love to be your lender.  Call (651) 552-3681, or just apply online at https://joemetzler.com/application.  NMLS274132. Not an offer to enter into an interest rate lock agreement.  Not everyone will qualify. Equal Housing Lender.







Low down payment, no down payment loan options for 2017

Minneapolis, MN:  Just 10-years ago, 30-year fixed rates were 6.125%, and the real estate market was hot. With rising interest rates, 2017 may be a bit more challenging for home buyers. But the biggest challenge for most people who wish to buy a home is down payment.

You do not need 20% down payment to buy a home! I repeat, you do not need 20%. This large down payment myth has been around forever, but it simply isn’t true for the vast majority of people buying their first primary residence. There are many program that allow for no down payment, or low down payment. Some jumbo loans buyers (loans over $424,100 in most parts of the county), as will people buying investment properties will usually need a large down payment. But for the rest of us, there are many low down payment, no down payment loan options for 2017.

First Time home buyers, Down Payment Assistance

First Time Home Buyer programs:

The term first time home buyer program covers a wide net of potential programs and options. To be a first time home buyer, you simply must not have owned a home in the past three-years. If you owned a home in the past, but it has been longer than three-years, you are a first time home buyer again. Some options allow for lower rates, cheaper mortgage insurance, and even down payment assistance. Most come with additional strings attached, like household income requirements, lower debt to income requirements, and that you must take first time home buyer education classes.

FHA Loans:

FHA backed loans are very popular, and only require a small 3.50% down payment. The down payment can be your own money (checking/savings/retirement), a gift from a family member, or can come from a down payment assistance program. FHA loans are more forgiving than other loans, for example allowing just a two-year waiting period if you have a previous bankruptcy, and a three-year waiting period after a previous foreclosure. Maximum loan limits apply based on the medium income of the county the property will be located.  Check FHA Loan Limits

Conventional 97 Loans:

Both Fannie Mae and Freddie Mac offer a 3% down payment program.  The down payment can be your own money (checking/savings/retirement), or a gift from a family member. This is a great program, especially for those with higher credit scores, or homes that need a little TLC that might not pass FHA loan inspections.

Conventional HomeReady™ Loans:

Fannie Mae offers an additional 3% down loan called HomeReady for first time home buyers. You need to take a home buyer education class, but you’ll be rewarded with lower interest rates, and lower mortgage insurance than the standard 3% down conventional loan.

Conventional 95 Loans:

Both Fannie Mae and Freddie Mac offer a basic 5% down payment program.  This is your everyday, plain vanilla mortgage loan available to everyone.

VA Loans (100% financing):

Available for active or retired U.S. Military personal, the VA loan is truly one of the best benefits this country offers for your service. The VA loan is a no down payment program, and also has no mortgage insurance whatsoever. This is a huge savings per month over any other low or no down payment loan. Closing costs can be rolled into the loan, making for a home purchase, that for most people, is about as close to zero money out of pocket to buy a home as you’ll ever get.

USDA Rural Housing (100% financing):

Available to those wishing to buy in more rural areas of the country, the USDA Rural Development loan does not require a down payment. While the loan does have mortgage insurance, the cost is very low compared to other loans.  You need to meet household income, and property location requirements.

Down Payment Assistance:

Down payment assistance comes in many different flavors from neighbors, city, county, and even state programs. Welcome first time home buyers. Apply onlineGenerally these are in the form of a loan that needs to eventually be paid back, but there are a very small number that are actually forgiven if you live in the home a set period (like 9-years or longer). The assistance loan can be combined with a standard loan, like an FHA loan, to be used for down payment. Household income, and property location are common requirements.

The Bottom Line:

If want to own your own home, you have OK or better credit, a stable income, and at least a little money in the bank, by all means, you should apply for a home loan. Your Loan Officer will review your loan application, then go over the various program to see what programs you qualify for, how much house you can buy, what the payments might look like, and finally, how much cash you may, or may not need to put it all together.

Best case, you’ll be in your own home sooner than you thought.  Worse case, your Loan Officer will go over what you need to do to be in position to buy a home in the near future.  Either way, a win win for you.







Interest Rates Post Trump Election

Interest rates post Trump election have surprised just about everyone.

It’s been a long time since anyone lender was quoting conventional conforming 30-yr fixed mortgage rates at 4% or higher for their best customers, but as of yesterday, every mortgage lender is doing so.

images999888What a difference a week makes, last Monday, the day before the election, rates averaged 3.625%.  Over the past 3 days business day (Friday the markets were closed for Veterans Day), rates have moved higher and faster than the last big 3-day move back in 1987, where rates moved higher more quickly on an outright basis.

If you were on the fence for a refinance. You just lost, and should seriously consider locking now if it even remotely still makes sense.

If you were in the market to buy a house, rates are still great, and there is no reason not to buy a home. But consider the average $230,000 home here in Minnesota will cost you $50 more per month at a 4.00% rate versus a 3.625% rate.

Why have mortgage interest rates gone up?

There are a lot of factors, but the biggest is simply the markets are feeling good about the direction of the country with the Donald Trump election. This has sparked the stock market, which has seen very nice gains. When stocks are good, mortgage rates are bad.  When stocks are bad, mortgage rates are good.

 







Mortgage Interest Rates are AWESOME

mortgage interest ratesIn terms of standard conventional 30-yr fixed mortgage rates, the BEST we’ve ever seen was for just a few days in 2012, when the best clients could get 3.125% – 3.25%.

Mortgage interest rates dipped back to 3.25% for a brief time back in July 2016, but since then have been hovering in the 3.375% to 3.50% range.

So what does all this mean for home owners?

It means if YOU ACT NOW, congratulations, because other than one week this past July, and one week back in 2012, you are getting the most awesome interest rates of all time right now TODAY!

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I provide Home Mortgage Loans in MN, WI, and SD and I can be reached at (651) 552-3681.

Of course rates effective at this time of this post and subject to change.  Not everyone qualifies, etc. Not an offer to enter into an interest rate lock agreement







Finding the Best Mortgage Loan Officer

Minneapolis, MN:  Buying a home for most people is the largest financial transaction of your life. Finding the Best Mortgage Loan Officer  that is licensed, educated, experienced, professional and ethical is probably the most important decision you’ll make next to actually picking out that perfect dream home.

Most people these days pick their mortgage company one of three ways:

  1. Calling the bank where they have their checking account
  2. Going with whomever the Realtor suggests
  3. Online search (but usually only for the person quoting the lowest rate)

None of these in and of themselves are right or wrong, but here are some tips to know and understand:

First, understand that the mortgage company or bank that you choose in most cases has little to do with the success of your transaction. Essentially all mortgage lenders have and offer the same basic programs with the same underwriting guidelines. FHA loans for example are FHA loans no matter who you call, so in most cases, there is nothing special that one lender has over another.

Yet for others, there can be some differences, especially if you are on the edges in terms of loan approval. For example, a big bank with the stagecoach in their logo will not offer FHA loans over a 45% debt ratio, while some mortgage brokers (like us) will go to 50% debt-in-income ratio. This is a good example of why a mortgage broker may be a better choice, as they offer the products of multiple lenders, as opposed to just their own.

Using this one example, you may have lost out on your dream home simply because you chose the wrong lender.

Licensed Loan Officer Versus Simply Registered:

All mortgage Loan Officers must have a tracking / registration number known as an NMLS number. But having this number does NOT mean the Loan officer is licensed, or experienced.

Loan Officers at banks, credit unions, or mortgage lenders owned by a bank or credit unions can be, but are NOT required to be licensed in any way. Loan Officers at non-bank mortgage companies or brokers ARE REQUIRED to have an individual mortgage license.NMLS Consumer Access

You can check if your Loan officer is simply registered, or fully licensed by searching them on this public web site:  www.NMLSconsumerAccess.org.

At the bottom of the page, under licenses and registrations, there will either be one or more states listed, which means the person is licensed. If it indicates something similar to “Federal National Mortgage Originator”, this is a fancy name that means they are NOT licensed.

Being licensed versus simply registered does not automatically indicate if a Loan Officer is a good choice or not, but if one was doing the largest financial transaction of their life, I’d probably lien towards someone who has had to take schooling, pass state and federal testing, and is required to complete continuing education each year to be licensed, versus someone who didn’t have to do any of those things to simply be registered. Heck, even your hairdresser needs a license!

Using this example, you may have lost out on your dream home because of the the unlicensed, and inexperienced Loan Officer you chose.

Understanding Closing Costs and Interest Rates

Not only do most lenders only offer the same underlying loan products as everyone elsemortgage closing costs (Fannie Mae, Freddie Mac, FHA Loans, VA Loans, USDA Loans), but they all have the same underlying closing costs,  get the money to lend you from the same source, and interest rates are based on the same bond market everyday.

This is why you’ll notice all standard rate quotes are almost identical. This is why you’ll notice all closing costs quotes are almost identical.

All lenders have the same actual closing costs; appraisal, credit report, state deed taxes, county recording fees, title company charges, underwriting, origination fees, etc.  However, how lenders charge them to you can vary, and this is tied directly to your interest rate.

For example,  assume your shopping, and one lender says your closing costs are $5,000, and the next says $3,500. The lower price sounds good, and that would be true if the rates were the same. But they almost never will be.

More overhead equals higher rates

Advertising and buildings are expensive. The previously mentioned “Quick” lender for example advertises all day everyday on all TV channels, and radio stations all across the country.  You can’t go anywhere on the internet without seeing one of their advertisements.

How much does all that cost?  Must be millions. You are foolih to think that higher cost isn’t passed along to you in terms of the interest rate they charge you.

Sames with the big lenders with branches everywhere, and paying hundreds of millions for stadium naming rights.

Lender Credits

Lender credits towards your closing cost is a tool lender use to lower your out-of-pocket closing costs up-front by slightly increasing your interest rate. Mortgage interest ratesBy doing this, the lender requires less initially because they make it up by collecting more in interest over time.

Some lenders start right out of the gate by saying they don’t charge origination, or maybe they will pretend to pay for things like your appraisal. Someone is paying those items, and it is always you.

Now there is nothing wrong with taking a slightly higher rate to lower costs today. We do it all the time. But just understand that you are still paying for those costs, just in a different way.

Look at this 30-yr fixed screen shot from today for a $200,000 loan. At 3.875%, lender would charge $750 in discount points to “buy” this lower rate, but at 4,125%, lenders would reduce your closing costs with a lender credit of $2,250. The monthly payment difference between the two rates is $29.00.

Internet Lenders

There is nothing an internet lender can offer you that the local mortgage lender down the street can’t offer. They do not have lower rates, they do not have lower closing costs. But there are many things the internet lender can’t offer.

One big item is local knowledge, and dedication to the community. Some kid working in a cube in Detroit, MI could care less about my back yard or Minneapolis, St Paul, MN.

I constantly get phone calls from people who started a mortgage application with a big internet lender, who is “Quick In” mortgage.  They complain about high pressure sales, lack of product knowledge, mandatory up-front fees, failed closings, and more.

I also get a lot of calls from people who filled out an inquiry form at places that “Lend from a Tree”. Funny and cute commercials about applying in your underwear, but this place isn’t even the lender.  Rather, they take your name, then sell it to as many real lenders as possible for around $40 a lead. You are then inundated with calls from all these lenders trying to one up the other with false and misleading promises to get you to use them.

Big out-state internet lenders also NEVER have the ability to offer any state of local first time home buyer, or down payment assistance programs.

Using this example, you may have lost out on your dream home because you picked an out-state internet lender who doesn’t offer all the loan products available in your area.

Realtor Referrals

In theory, a Real Estate Agent referral to a Loan officer should be something of value, but not always. This is essentially because there are two underlying types of referrals.

A referral because the Real Estate Agent has worked with the Loan Officer for a long time, and knows them to be a licensed, knowledgeable, experienced mortgage professional looking out for your best interests. This is a good referral.

A referral because the Loan Officer works for the same company, or otherwise is heavily influenced by the owners of the Real Estate Company to refer to a specific lender or internal Loan Officer simply because it makes someone else money regardless of the qualify of the Loan Officer.

While not automatically bad, the second type of referral is highly suspicious. Tips to this type of referral are that the Loan Officer works for the same company, they share office space, or if you have already told your Real Estate Agent you have a lender you are happy with, and they become pushy or start talking negatively about your choice to get you to go to their choice.

The Bottom Line

As you can see, your Loan Officer choice is important. Ask questions, get answers. Just because someone refers, they advertise a lot, or appear to be quoting a super low rate or closing cost doesn’t mean they are the best for you, or that you shouldn’t shop or get a second opinion.

Take the time to pick a great lender, just as you take the time to pick the perfect house.

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Joe Metzler is a Senior Mortgage Loan Officer for Minnesota based Mortgages Unlimited. He was named the 2014 Minnesota Loan Officer of the Year, and #98 of the Top 100 Loan Officers in the Nation for 2015 by Origination News. He provides Home Mortgage Loans in MN, WI, and SD. He can be reached at (651) 552-3681







2015 Twin Cities home sales continue to strengthen

All signs point to Twin Cities home sales continuing to strengthen

Twin Cities homes sales maintained their strong pace through September, hitting a 10-year high, according to news releases this week from area Realtor associations.

signsThere were 5,114 closed sales last month, a 12 percent increase from last year and the highest level for September since 2005, the Minneapolis Area Association of Realtors said in a news release. Pending sales rose 12.3 percent to 4,635.

Fewer sellers listed their properties, with new listings decreasing 6.9 percent to 6,355. Inventory levels fell 16 percent to 15,928.

With more buyers than sellers, the median price rose 8.3 percent over last year to $222,000.

This supply-demand imbalance means prices have risen for 43 consecutive months, the association said.

Year-to-date prices have risen 6.8 percent on average

Also noted was a continued “product mix shift” back to traditional sales and away from distressed sales such as foreclosures. This also has brought up the median price.

We expect mortgage interest rates to stay below their long-term average for years to come, and around the low 4’s for the immediate future. The trick will be sustaining price gains that motivate enough sellers to list their properties without pricing out today’s buyers — particularly first time home buyers.

The momentum in both closed sales and pending sales certainly bodes well for 4th quarter and for a strong finish to 2015.

  • Anoka County – Up 11.4%
  • Carver County – Up 4.2%
  • Chisago County – Up 8.8%
  • Dakota County – Up 4.1%
  • Hennepin County – Up 7.5%
  • Ramsey County – Up 6.7%
  • Scott County – Up 3.4%
  • Washington County – Up 3.1%
  • Wright County – Up 14.8%
  • 13 County Metro area – up 8.3%







How Mortgage Rates Change

Minneapolis, MN:  Many people believe that if you call around to enough lenders, that you will find someone offering a great deal.  The reality is that it doesn’t really work that way.  We generally say that if you call around to enough lenders, you might find the biggest liar.

Are All Lender Essentially The Same?

First understand that for all your traditional loans; FHA, VA, Fannie Mae, and Freddie Mac loans, which encompass the vast majority of all mortgage loans done in this county, every mortgage lender follows the same rules, have the same underlying costs, and set rates based on the same thing.  If my rates go up, so do theirs.  If my rates go down, so do theirs.

worth_balanceEver notice that most of the time, when purchasing the same item at Target or Walmart, the price is virtually the same thing.  Maybe just a tiny difference?  The same thing goes with mortgage loans.

Are there minor differences in mortgage companies rate?  Yes, but generally, the difference between the best and the worst on any given day is about .25%, and really only has to do with overhead, not one being able to really offer something better.

If my cost is the same as their costs, but they have to pay for advertising on all TV channels, radio stations, and all over the Internet.  If they have to pay for stadium sponsorships, and the brink and mortar buildings on every corner, but I don’t… Who do you think can then offer better deals?  Yes, it is that simple.

So What Changes Mortgage Rates

Long term fixed rate loans, like Conventional fixed rate loans and Government back VA Loans and FHA Loan lenders all set their rates based on the pricing of Mortgage Backed Securities.  These mortgage bonds are traded in real time, all day in the bond market.

This means rates or loan fees (mortgage pricing) moves constantly throughout the day, being affected by a variety of economic or political events.  The bond market most days trades in a small zone. So the mortgage rate the lender sets in the morning, is usually good all day long.  But sometimes, the bond market has bigger changes though out the day, meaning a mortgage lender could potentially change rates during the day, sometimes even multiple times in one day.

This can be very frustrating for mortgage shoppers.  You call this morning to get a mortgage quote. Quote in have, you talk to your spouse about it, calling back in the afternoon, just to get a different quote.  Sometimes this change is in your favor.  Sometime it is not.

Therefore tracking these securities in real-time is critical. When MBS pricing goes up, mortgage rates or pricing generally goes down.  When they fall, mortgage pricing goes up. Click this link to track our live mortgage rates for MN, WI, and SD.

Working with a mortgage loan officer who knows and understands the mortgage back security market, someone who can help you understand when to lock your interest rate, or if you should float your interest rate it critical.

I am one of those Loan Officers, not just your typical Loan Application Clerk.  I lend in MN, WI, and SD.







Home sales, listings down for November 2014

Home sales, listings down for November 2014

While still touting a housing market recovery, area real estate associations are mindful that the market is still recovering, with the fits and starts that all that entails.

Data for November bear this out, with the area Associations of Realtors reporting November decreases in pending sales, closed sales and new listings.

Pending sales, or the number of signed purchase agreements, fell 7.5 percent in November compared with last year. New listings decreased 12.8 percent. November closed sales ended down 17 percent to 3,213 sales, versus last year’s 3,873 sales.

The median sales price rose 5.1 percent to $205,000, marking 33 consecutive months of year-over-year median price gains. However, this figure was down from an October median of $209,000.

As has been the case in recent years, the year-on-year uptick in prices indicates fewer distressed properties on the market; these properties, foreclosures and short sales, are where the home sells for less than is owed on the mortgage, and typically drag down median prices.

Minnesota mortgage ratesThe Minneapolis, St Paul, Twin Cities housing market is clearly continuing the process of recovery. Sales prices are up, but on fewer overall sales. Fewer distressed sales (foreclosures and short-sales) are certainly a welcome sign for homeowners and Realtors alike.

The Minneapolis Association of Realtors cited increased condo activity for the rise in prices. The median price of new construction condominium sales rose 65.2 percent in November to a new high of $366,242, it said.

Mortgage interest rates continue to hold just slightly above historic lows, making homes very affordable.  You can check current MN, WI, and SD interest rates here.







Mortgage rates – Should I Float or Lock

Float or Lock your Mortgage Loan Interest Rate?

Minneapolis, MN:  I get asked the should I float or lock question many times every week, and I generally have the same answer. Lock.

Watching the markets, and trying to figure out what the markets will do is an exercise in futility. There are simply too many reports, commentary, and data constantly being analyzed from every angle and perspective. The last 10-years, much of the talk has not matched the actual trading of bonds.

Interest rates change daily

During the time most home owners are in what lenders call a lockable position, which generally speaking, this means the timeframe after you’ve signed a purchase agreement, and about 10-days before your closing. You can’t lock a rate until you have the exact house, and eventually the lender has to finalize your approval and send out documents for your closing.

Mortgage Interest Rates Minneapolis, MNMortgage interest rates are likely to move up and down many times during this lockable period, which is usually 60-days or less. Rarely do we see rates make big moves, rather just small moves of 1/8th to 1/4 percent higher or lower during that period.  A typical example week may be something like 4.625% on Monday, 4.75% on Tuesday, 4.625% on Wednesday, 4.50% of Thursday, and 4.625% again on Friday.

Now if we KNEW what rates were going to do, we could easily just lock on this example Thursday. Unfortunately, no one has a crystal ball, and no one knows what mortgage rates are going to do.

Therefore my float or lock advice is to always lock your rate the moment you are able to lock, and never look back.

If you lock:  You are OK with where mortgage rates are today, and how they relate to your loan payment.  You are all done with this part of the home buying process, and don’t have anything to worry about. You can focus on other aspects of your new home. While rates may go down before you close, generally speaking it might only be 1/8th percent.

If you float: Mortgage Rates can go up, or rates can go down. If they go down, great – you win.  If they go up, you lose. While rates may move before closing, generally speaking it is rare to see it move more than about 1/8th percent before closing.  Sure, you would like a little lower rate, but you are stressing yourself worrying about rates.  If 1/8th to 1/4 percent makes that much of a difference, you are probably buying a house you really can’t afford.

No one knows what interest rates are going to do. Lock, be happy, and don’t worry about it.







Homebuyer jump into market as rates rise

Mortgage rates have risen about 1% since May 2013, and that is clearly making potential home buyers jump into purchase contracts more sooner than later according to a recent Fannie Mae housing survey.

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The survey shows 57% of people expect mortgage rates to rise in the next 12 months, with just 7% responding that rates will remain stable. The previous survey indicated only 46% of people expected mortgage rates to rise.

Potential home buyer clearly see the writing on the wall, and anyone even close to purchasing a home realize interest rates, while up from previous lows, are still historically good.  Given the fact home prices are rising and rates are rising, homebuyers have decided that now is time to get off the fence and get serious about buying real estate.
Americans’ outlook on the economy deteriorated slightly, though many were more optimistic about their personal situation. The share of people who expect their own personal financial situation to improve over the next year jumped to 46%, its highest level in three years, while  16% said they expect their situation to worsen, unchanged for the third consecutive month.







Sorry, Minneapolis rates are NOT going back down!

Minnesota mortgage ratesMinneapolis, MN:  This isn’t easy to say, but understand…  rates are NOT going back down to where they were last month.

Today’s mortgage rates for the best customers at about 4.625%, but range up to  above 5%, based on lender, credit score, program, down payment, etc..  Our quoted rates today are 1/2% higher than just last Monday. Volatility is the name of the game, as we have seen rates  jump by as much as .25% in interest rate in a single day. What we quote in the morning may be long gone by the afternoon.

With the drastic and dramatic jump we’ve seen since May 3rd, consumers may have thrown the brakes on for looking at houses, or refinancing  – waiting for rates to come back down.  It is important that you a work closely with your favorite Mortgage Loan Officer to understand rates, what they are, why they move, and if you should lock in a rate.

While I don’t know for sure, I believe the 4.50% – 4.75% range is our new floor of support for a little while.  We may see a slight uptick, and we may also see a minor drop as the market players settle into the new reality, but the 30-year fixed rate loan in the 3’s is now just a memory.

 







As mortgage rates climb, beware of not accurate quotes

Fed Chairman Bernanke

St Paul, MN: Mortgage rates the last few weeks have climbed steadily on the statement from the Federal Reserve that they plans to scale back, and ultimately end the buying of Mortgage backed Securities by the middle of 2014.
This news translated into mortgage rates having one of the worst weeks in history, with Friday alone generating a 1/4% rise in interest rates. While 1/4% isn’t a killer by itself, combined with the rate increases from the earlier part of the week, the combination proves to be a nightmare for mortgage rates. Real mortgage rates ending Friday for the best clients are now about 4.625%.  This compares to 3.50% just a month ago.

BEWARE OF WHAT YOU READ – Not all Mortgage Quotes are current

I took numerous calls this week, where clients complained about the rate I was telling them compared to what they were reading elsewhere for “average rates.”  Most of the average rate information published on web sites, newspapers, and reported by the media comes from the weekly rate report published by Freddie Mac.  While the report is great for tracking averages over time, it is the AVERAGE of rates compiled through the end of the previous week, then reported on the following Thursday.

freddieAnother problem is many web sites don’t update daily, or even weekly.  Newspapers, and other print media may have collected rate information on Wednesday morning for publication in Sundays paper. This week, that would leave people with quotes at least .375% to .500% lower than reality.

If you are buying Google stock, does it matter what last week average price was, or what you can buy if for today?  Only rely on constantly updated and accurate rate reporting system, or while a phone call to a Loan Officer.

Check LIVE and CURRENT MN and WI Mortgage Rates 24/7

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Mortgage Rates Annihilated

Minneapolis, MN: Mortgage rates continue to creep higher, as the Fed has announced a plan to scale back their buying of mortgage backed securities.

lmrWhat is causing rates to rise?

The Mortgage-backed-securities (MBS) market is what dictates loan pricing.  Simply put, the government has been artificially holding down rates by buying billions of dollars worth of mortgage backed securities. The ideal is simply to stimulate the economy and job growth with cheap money.  As the economy and job markets improve, the FED has said it would start to taper, then completely end their purchasing of mortgage bonds.

Without the FED buying bonds, fear has taken over.  Fear is never in the markets favor, as one can clearly see in the run up of mortgage rates.

As many of you know, we are currently in round three of the Fed buying bonds.  At the end of round one, when the Fed backed off of buying bonds, rates started moving higher, and quickly.  At that time, the Fed quickly jumped back in to settle things down. We don’t see that happening this time around.  As a matter of fact, the Fed has clearly noted that rising interest rates is something they want.

Actual Effect

The past two month, we have good from best execution 30-year fixed rates about 3.50%, to today, best execution 30-year fixed rates about 4.25%. That is the highest we’ve seen since late 2011. This is also the sharpest rise in rates in 10-years.

If you are even remotely thinking of refinancing, you’d better do it now.  If you are thinking of buying a house in the very near term, you should do it now.  If you are thinking of buying somewhere down the line, you are likely to see higher mortgage rates…  But nothing that should ever stop anyone from buying a home.

For perspective, read this previous article of mine on mortgage rate history.

Should you float of lock?  Read this daily rate lock advisory







Mortgage Rate Perspective

balance_ratesMinneapolis, MN:  With rates having moved up slightly recently, it is good to keep current mortgage rates in perspective.

Here is a mini historic look at conventional 30-yr fixed loan rates

  • In the early 1960’s = 5.25%
  • In June 1971, about 7.53%
  • In June 1981, about 16.70%
  • In June 1990, about 10.16%
  • In June 1998, about 6.99%
  • In June 2000, about 8.29%
  • In June 2005, about 5.58%
  • In June 2009, about 5.52%
  • In June 2010, about 4.75%
  • Last month (May 2013) about 3.54%
  • Today… about 3.91%

I bought my first house in 1981.  I paid 16% for my FHA 30-year fixed!  That same loan today is 3.50%







Rates Tick Up – Buyers Want to Lock Low Rates

Minneapolis, MN: Mortgage interest rates have been near historic lows for a long time. Home buyers have fallen into a feeling that low mortgage rates are normal.  That attitude changed a bit recently as mortgage rates jumped up to the highest level in over a year.
lmrInterest rates on baseline  30-year fixed mortgage  surged 12 basis points to average 3.9% in the week ended May 24, the highest level since May 2012. The upward trend went even slightly higher this week, with most lenders reporting best execution rates at 4.00%
The slight up-tick in rates has caused many potential buyers to jump off the fence, and act now before interest rates go any higher.

So why are rates moving higher?  It is complicated, as there are many factors, but the simplest explanation is that the economy is slowly getting better.

Another big reason is that the FED has been propping up mortgages by being the primary buyer of mortgage backed securities. Without them buying these securities, the entire mortgage system would collapse. While they have, and continue to say they will buy the securities for the immediate future, there are signs that this policy may be changing, with a pull back of the buying because of the improving economy

Simply put, rates may be slowly starting to return to where the market should be if supporting itself, and not being propped up by the Fed.