Category Archives: Mortgage Rates

ratelockA rate lock is a written agreement that guarantees a borrower a specific interest rate on a mortgage loan as long as the borrower and lender close the loan within a specified period of time.  Most often rate locks are for a period of 30-60 days.  The rate lock guarantees that a borrower will get a specific interest rate for the life of their fixed rate mortgage.   This gives the borrower the confidence to move forward with the loan knowing that their mortgage payment is a specific amount.

The appeal of locking in a rate has recently grown because rates are generally rising.  Already, rates are a full point higher than this time a year ago.  However, the borrower must be sure that the loan can close within the rate lock period.  Borrowers need to be aware of their closing date!  All too often a borrower will call a mortgage lender and get a nice low quote for a mortgage rate.  The catch is that the borrower may get a quote on a rate that needs to close within 15 days.  Not many loans close within 15 days.  It’s imperative that the borrower ask the lender the rate, the lock in period and whether there are any points associated with the rate.  I’m sure everyone has seen the fine print at the bottom of mortgage ads showing a specific interest rate with 2 points.  A point is 1% of your loan amount so on a loan of $300,000, the borrower has to pay an EXTRA $6,000 in closing cost for the 2 points.  Buyers BEWARE.

What happens if your rate lock expires because you cannot close by the expiration date?  First of all, the longer the lock period then the higher the interest rate or points.  Many lenders will lock a rate for 120 days.  However, this extended lock period comes at a price.   If your rate has expired, you will get the higher of the locked rate or market rate.  If you realize that you need more time for closing prior to lock expiration, you can generally extend the rate for a specific period of time for a price.  The extension can cost anywhere between .250 points to 1 point depending on the length of the extension.

Some mortgage lenders allow a “float down” option.  You can lock your rate but then you are allowed to re-lock at a lower rate if the mortgage rates decline.  However, these float down options either cost money upfront which is lost even if you don’t exercise that option or the beginning rate is higher than the market rate at the start of the process.

Why not just lock your rate with different lenders on different days?  That option could get expensive since most lenders require a non-refundable deposit when you lock the rate.

Borrowers need to ask the lender at what point during the process can the loan be locked, what is the interest rate and are there any points, what is the length of the rate lock, can the Lender close during the period of the rate lock, and what happens if rates drop?  An educated borrower will be a happy borrower by avoiding surprises at the closing table.

cathy dylAbout the author:  Cathy Dyl is a Senior loan officer at Stoneham Bank  (NMLS Originator ID # 49343) and has been working in the mortgage industry for over 17 years.You can contact her directly at cdyl@stonehambank.com  or learn more about her here



The month of June has not been kind to mortgage interest rates.  In fact, rates experienced the most rapid climb in 26 years.  It’s unlikely that rates will be that low ever again.  So why did this happen?  According to CNN there are 3 basic reasons for the sharp increase in mortgage rates:

 

  1.  The Fed announced that they are going to stop bolstering the housing market.  The Fed has kept rates at rock-bottom levels by buying up $85 billion a month of Treasury bonds and mortgage-backed securities.
  2. McMansions are making a comeback.  As the Fed stops their purchase of securities, private investors will have to pick up the slack.  Guess what?  Private investors demand a better payoff which means raising rates for borrowers.
  3. The economy is no longer reeling.  During the recession, the Fed lowered its short-term interest rate to near zero to stimulate the economy.  Economic conditions have considerably improved over the past 4 years.  Therefore, we are seeing rate increases.

Low mortgage rates happen when the economy is in distress or in the case of the late 1990s when the Chinese bought Treasury bonds.  Any return to normal economic conditions translates into higher mortgage interest rates.

Don’t jump off the cliff yet.  Is a rate of 4.5% on the 30 year fixed mortgage really so bad?  Most of us remember when a rate of 10 – 15% was actually good!

What can you do to lower your mortgage interest rate?  First of all be sure you have an excellent credit score.  Your target should be a credit score of at least 740.  Anything lower and you may have to pay a higher rate.  An excellent credit score means that you pay your bills on time, you do not owe more than 40% of your credit limit on credit cards,  you have just 3 major credit cards (there’s no need to have 10 store credit cards) and you actually have a credit history.  Paying cash for everything does not increase your credit score.

Save for your down payment.  Some mortgage programs require a minimal down payment but a larger down payment may help to avoid or reduce monthly private mortgage insurance.

In the foreseeable future, we are headed for a very painful adjustment period in terms of mortgage rates thanks to the Federal Reserve.

cathy dylAbout the author:
Cathy Dyl is a Senior loan officer at Stoneham Bank

(NMLS Originator ID # 49343) and has been working in the mortgage industry for over 17 years.You can contact her directly at cdyl@stonehambank.com
or learn more about her here


Being in the mortgage business for over 17 years, the first question asked of me is what can I afford to buy?  I then answer their question with a question.  What do you want to afford?  The customer looks at me and says you’re the professional.  I ask, “Do you have a budget, do you know what all your bills are and what projected bills will be?”  How are you tracking this information?

It is sad to say but not many people prepare a household budget.  I believe the reason for this is because people don’t want to know or see what they spend their money on.  By putting it down on a spread sheet it makes you accountable for what you are doing with your money.

So back to your mortgage:  how can you make a decision on what you can spend on a home if you have no idea what you spend now!

So how do you start?  Just do it!  On a spread sheet start inputting bills as they come in and as you spend money.  Just by doing this one action you will find that you end up saving 25% more than you did prior to this.  Just being aware will make you not buy that extra coffee, candy bar, or shirt.

Below is a link to a great article to help start a budget.

http://money.cnn.com/magazines/moneymag/money101/lesson2/index.htm

Below is a link for free budget planning software.

https://www.moneysmart.gov.au/tools-and-resources/calculators-and-tools/budget-planner

So with this useful information, you can now determine where your money is going, how much can you save, and what you can afford for a mortgage and the cost of the home.

Now that you have this valuable information, it’s time to sit down with your qualified mortgage professional to see what you can pay for a house.

About the author: Fred DaMore is a Mortgage Specialist at Ross Mortgage. You can contact him at fred.damore@rossmortgageco.com

 


The Fiscal Cliff fast approaches.  What does this mean for mortgage rates?  Let’s start at the beginning.  What is the Fiscal Cliff?  At midnight on December 31, 2012, the Budget Control Act of 2011 will begin to take effect.  This Act was designed to cut government spending and end certain tax breaks. Most people will have fewer dollars to spend because of higher payroll  taxes and few tax breaks.  The government would slash certain programs.  The impact of the Fiscal Cliff could be dramatic and lead to a recession.

The fact that no compromise on the tax and spending bill has yet to be reached by Congress creates worries in the market. Stocks fell but mortgage rates on fix rate programs have either declined or held steady.  Going over the fiscal cliff has investors worried about an economic  slowdown.  In turn this creates a demand for the safety and security of US government bonds.  Mortgage rates are determined by the  long term  bond market.  Generally, bad economic news results in lower mortgage rates.  Just last April the mortgage rates on a 30 year fixed rate mortgages were just over 5.00%!  Here we are less than a year later with rates hovering around 3.375%.

Mortgage rates continue to operate near all time best levels.  However, the uncertainty of the fiscal cliff means that rates could easily move higher or lower.  The feeling is that there’s more risk in waiting to lock in a mortgage because rates remain very low so rates are more likely to move up than down .

It’s the winter but mortgage rates make it a great time to shop for a home.  Rates remain low and homebuyers have less competition.

About the author: Cathy Dyl is a mortgage loan officer at Stoneham Bank (NMLS#49343) with over 20 years of mortgage lending experience.  Read more about her on her personal site


Why would I buy a house during the holiday season?  There are plenty of reasons:

  1. Mortgage Rates – Rates are still really low. BUT The Mortgage Bankers Association predict that rates will begin to creep up slowly in the year ahead.  The sooner you find a house then the sooner you can lock that low mortgage rate.
  2. There’s less competition for a home because there are few buyers.  Therefore,  sellers  are more likely to negotiate.
  3. Mortgage lenders have few loans to process so it’s more likely that you will have a smoother loan process.
  4. Touring a home during cold weather lets you feel drafts.  You will quickly find if the windows need re-caulking or replacement.
  5. Knowledgeable home buyers may find great opportunities during cold weather.  Less competition equals bigger discounts!
  6. Rents continue to increase.  Why  pay  your landlord’s mortgage?

Are you convinced?  I hope so.  Get ready – get set – and buy now!

About the author: Cathy Dyl is a mortgage loan officer at Stoneham Bank (NMLS#49343) with over 20 years of mortgage lending experience.  Read more about her on her personal site

 


Mortgage rates have dropped to historic  lows.  Home prices are down from where they were a few years ago.  Rents continue to steadily increase.  In fact, this is the most affordable time since the 1970s to buy a home.  So why wouldn’t you buy a home?

Too many potential home buyers think they will not qualify for a mortgage.  There’s been many newspapers articles and television broadcasts stating that Mortgage Lenders have tightened mortgage lending guidelines.  True.  HOWEVER, it’s not as difficult to get a mortgage as most people perceive.  You don’t know until you sit down with an experienced Mortgage Loan Officer.

Much of my time is devoted to counseling potential home buyers on the necessary steps needed to get pre-approved.   Most borrowers get pre-approved in 24 hours.  However, it’s not uncommon for me to work with future home buyers for 6 or 8 months before they get pre-approved for a mortgage.  During that time we work on improving the four “C”s of mortgage lending.   First and foremost is credit.  I can advise a borrower on ways to improve their credit score so they can qualify for a mortgage.  The second “c” is capital.  In some instances, a borrower needs to save more money before they purchase a house.  These days, there are several programs that require small down payments.  The third “C” is capacity to pay the mortgage in a timely manner.  We look at earnings and job history.   The final “C” is collateral or the value of the property that they decide to purchase.

So what are you waiting for?  Get out there and get pre-approved for a mortgage.  There may not be another time like this for many, many years to come!

About the author: Cathy Dyl is a Mortgage Loan Officer at Stoneham Bank. (NMLS# 49343) She has over 20 years of mortgage lending experience and is a preferred loan officer of RE/MAX Legacy.