With the new administration we have, the extra stimulus the federal government is working its way through the markets, inflation, or fears of inflation is definitely upon us and as result, an unstable mortgage rate environment is upon us.
The reality of it is, no mortgage loan officer, no matter how good they are, has a crystal ball about what’s going to happen with rates. All we can do is speculate about the future of interest rates and make pragmatic decisions with the tools and resources we have available on any given day.
Generally speaking, when there is bad economic information, mortgage rates tend to get better because people want to put their money somewhere safe, which is the bond market that generates a fixed income. As a result, yields rise and the rates to consumer improve conversely. When the economy is doing well or when there are positive economic information people will move their money into the stock market. Yields on bonds will drop, rates will rise and the stock market will become exuberant as people feel optimistic about the economy. That’s just mortgage rate 101. This relationship does not always hold true, but 80 percent of the time it does.
What you can do?
Watch the following:
• 10-year Treasury is a great indicator of mortgage rates.
• Freddiemac.com has the average 15-year fixed and the average 30-year fixed-rate mortgage with the average fees on a weekly basis.
• Make sure the loan officer you have hired uses a mortgage-backed security service and actually watches the market.
Quit chasing the interest rate. Here’s why. Interest rate trend right now is up. This means if you get a rate at 9 a.m. from a lender that the same rate could change again by 10 that same morning one or even two more times and multiple times throughout the course of that day.
Most mortgage companies, in fact 90 percent of them in America that are selling loans to Fannie Mae and Freddie Mac, all get their money from the same place so it’s highly unlikely that you’re going to get a radically different offer from one lender to another, all things being equal.
Most mortgage companies obviously don’t make money for the origination of loans unless they have competitive rates and fees. They just have to be in order to conduct business on a daily basis. The bottom line is if you get a good rate and a good price for your home purchase and you have a contract don’t screw around and jeopardize your contract. The same thing goes on a refinance. You don’t have time to sleep on it, talk to the spouse and get back to that lender the next day the rate in the pricing and terms change again.
It would be highly advantageous to work with a lender who primarily will service the loan. The reason why is because they have choice power and control over their rate and their pricing because they’re actually lending you the money. The value of that to you is that many times these lenders can offer you a free float down in the process if rates drop, and the discount subsequently refinances in the future because you become part of servicing portfolio.
All of this is particularly important because you want to make sure that you’re setting yourself up for success at the end of the day. That’s just the reality of it. The other reality is you will always find something lower. If you find XYZ mortgage company and you get a rate in a price you will find it lower, and you’ll then find something lower than the next guy down the street and the next one after that and so on. At some point, you have to decide and hope at the time of application you’re making a good decision. Making that decision with good advice from a lender that thinks a big picture and truly cares about your financial picture versus giving you a .125 in rate can make a huge difference in your financial success.
Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at www.sonomacountymortgages.com.