Federal Reserve Chair Jerome Powell said during a Federal Open Market Committee press conference that the central bank must control inflation to keep the housing market from becoming even tighter, but experts say there are things the agency could do besides cutting interest rates that might lower housing costs.
Bloomberg News
The Federal Reserve’s tough love approach for the housing market has fueled a long simmering debate about the central bank’s role in the country’s ongoing affordability crisis.
After this week’s Federal Open Market Committee meeting, Chair Jerome Powell said the best thing the Fed can do for the housing sector is keep interest rates high until inflation is fully under control.
“The housing situation is a complicated one, and you can see that’s a place where rates are really having a significant effect,” Powell said during his post FOMC meeting press conference. “Ultimately, the best thing we can do for the housing market is to bring inflation down so that we can bring rates down, so that the housing market can continue to normalize. There will still be a national housing shortage, as there was before the pandemic.”
When the Fed raises interest rates, its goal is to curb demand in the market by increasing borrowing and financing costs. For the housing sector, the thinking goes, as mortgages become more expensive, fewer people want to buy homes and prices stabilize.
But some economists say reality is not so simple. Mark Zandi, chief economist at Moody’s Analytics, said the elevated rates are not only curbing demand for new mortgages, they are also weighing on the supply side of the housing market in various ways, making it more costly to acquire land and develop both rental and for sale homes.
Zandi added that many existing homeowners feel “locked in” to their current, ultra-low mortgage rates, “thus limiting the supply of existing homes for sale, and reducing demand for homeownership and thus increasing rental demand and rents.” This is especially significant given that rents — and rental equivalents for owned homes — are how shelter costs are measured in inflation indexes.
“Given the unusual circumstances in the nation’s housing market, the higher rates are weighing on housing supply, pushing up rents and housing inflation as measured by the CPI and PCE deflator,” Zandi said.
Meanwhile, other economists and policy experts support the Fed’s approach. Diane Swonk, chief economist at the financial services firm KPMG, said cutting rates would induce greater demand in an already supply-constrained market, thereby increasing prices further without addressing the key factor holding back new supply: local zoning and land use laws.
“Washington can point at the Fed and say fix [the housing market], but the Fed doesn’t really have the tools to fix it,” Swonk said. “The tool they do have, if they were to wield it right now, the fear is that they would just stoke a more pernicious bout of inflation rather than defeat it.”
But others say the Fed has another tool to address housing affordability in a more meaningful way than by cutting interest rates alone: its balance sheet.
At the onset of the pandemic, the Fed purchased mortgage-backed securities en masse as part of a quantitative easing effort aimed at keeping financial markets functional. Its MBS holdings more than doubled during the next two years, peaking at $2.7 trillion before the Fed began allowing the assets to roll off their books. It still holds more than $2.3 trillion of mortgages today.
“The Fed bought way too many mortgages for way too long in the name of COVID relief and is now, somehow, perplexed that home prices continue to appreciate,” said Aaron Klein, a senior fellow in economic studies at the Brookings Institution. “Part of the problem was caused by the Fed’s balance sheet purchases. The solution may also lie on the balance sheet.”
The Fed’s mortgage holdings — which include securities backed by the government-sponsored entities Fannie Mae, Freddie Mac and Ginnie Mae — make up a significant portion of the overall market for outstanding agency MBS, which totals more than $9 trillion.
The Fed’s purchases provided liquidity to the mortgage market, driving down yields and driving up asset prices. To reverse this, Klein said, the Fed could sell its MBS assets into the market, though he noted that such a move would not be welcomed by existing homeowners.
“Having propped up home prices, the Fed is now loath to lower home prices,” he said. “It’s very politically unpopular to lower somebody’s home price.”
Mark Calabria, the former director of the Federal Housing Finance Agency, notes that the Fed’s preference for continued higher rates does not preclude it from driving down its MBS holdings more aggressively.
Calabria agrees that it would be premature to cut interest rates, noting that inflation also factors into mortgage costs.
“Ultimately, expected inflation enters mortgage rates,” he said. “The current rates are not simply a reflection of Fed tightening but also reflect inflation expectations.’
At the same time, Calabria said the housing market would benefit from the Fed shrinking its mortgage holdings more quickly.
“The Fed should never have purchased so much MBS in the first place,” he said. “The best move now would be to sell off more of its MBS.”
Some Fed officials have said the Fed should seek to exit the mortgage market entirely. Fed Gov. Christopher Waller has said he’d like the Fed’s MBS holdings to fall to zero, though he has not endorsed actively selling assets.
As part of its quantitative tightening campaign, which began in June 2022, the central bank is allowing up to $35 billion of mortgage securities to mature monthly without replacing them. During its May meeting, the FOMC voted to maintain the cap on MBS runoff while lowering its limit on Treasury securities maturation from $60 billion to $25 billion. It has also begun reinvesting the MBS principal payments that exceed the cap into Treasuries, accelerating the shift away from mortgages.
To this point, mortgages have rolled off the Fed’s balance sheet more slowly than Treasuries. Since the Fed began this round of quantitative tightening, its MBS holdings have declined roughly 13%, compared to 22% for Treasuries. This is in part because of the higher cap on Treasuries, but also because mortgages typically have longer durations. Higher interest rates have led to fewer refinancings, thus limiting the number of mortgages being paid off early, too.
The debate about whether higher rates do more to help or hurt the housing market has centered, in recent months, on the outsize role shelter costs have played on the overall inflation picture.
The Bureau of Labor Statistics’ Consumer Price Index, or CPI, report for May, which was released this week, showed shelter costs are up 5.4% over the previous 12 months, compared to an overall inflation reading of 3.3%, or 3.4% when factoring out food and energy costs.
During his post FOMC press conference, Powell said the stickiness of housing inflation readings is partially the result of how that category of price growth is measured. U.S. inflation indexes focus on rental costs — along with estimates of owner’s equivalent rent for owner-occupied properties — which rose sharply after the COVID crisis subsided. Because these changes are only recorded when new leases are signed, Powell said it has taken longer than expected for data to reflect recent slower price growth.
“What we’ve found is that there are big lags,” he said. “There’s sort of a bulge of high past increases in market rents that has to be worked off, and that may take several years.”
Mike Frantantoni, chief economist for the Mortgage Bankers Association, noted that the Fed’s preferred measure of inflation — the core personal consumption expenditures, or PCE, price index — applies a smaller weight to shelter costs. This is why this inflation reading, which came in at 2.8% in April, is even closer to the Fed’s 2% target than CPI.
While some say this reading is close enough to begin relaxing monetary policy — with the hope that a more normalized housing market could help carry it the rest of the way — Frantantoni said this is a gamble that carries more risk than reward for the housing sector.
Frantantoni said lower rates would lead to more construction activity and alleviate lock-in effects, but noted that those changes would take a long time to play out and, ultimately, provide benefits to the market. He would rather see the Fed wait until price growth has stabilized across the board before trimming its policy rate.
“Changing their monetary policy framework to ignore shelter prices now, at the onset of a rate cutting cycle, would not be a good tactical move,” he said.
A banker’s acceptance (or BA) is a financial instrument used to guarantee large future transactions, often in the import/export markets. As a debt instrument, it can function as an investment, commonly traded between large banks and institutional investors on the secondary market. It can trade at a discount to par like U.S. Treasury bills in money markets.
BAs play a key role in facilitating international trade and in broader fixed-income markets. While you may not own an individual banker’s acceptance in your checking account, these instruments help promote sound and liquid markets.
What Is Banker’s Acceptance?
A banker’s acceptance (which you may see written as bankers acceptance) is a short-term form of payment guaranteed by a bank; it is often used for international trade transactions.
Banks often make money on the spread between the buy and sell price on a fixed-income asset or through fees and commissions. BAs commonly have a maturity of between 30 and 180 days and trade at a discount to par. Functioning like a post-dated check, they are seen as a relatively safe method of payment for large transactions. BAs are considered short-term debt instruments.
Here are some more details about banker’s acceptance and how these instruments work.
• The BA is issued and priced based on the creditworthiness of the issuing bank. An investment banker earns a commission for making the transaction.
• Only customers with a strong credit history can access the BA market. These entities are often corporations involved in international trading (import/export) markets.
• A banker’s acceptance can also be highly marketable and liquid, allowing money to transfer from one bank to another.
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How Banker’s Acceptance Works
A banker’s acceptance is considered a time draft. A business can request one from a bank as a way of gaining enhanced security while conducting a deal. The bank essentially promises to pay the firm that is exporting goods a particular amount of money on a certain date. When it does this, it takes funds out of the importer’s bank account.
Typically, the term of a banker’s acceptance is between 30 and 180 days.
Who Issues Banker’s Acceptance?
Not all banks offer BAs. Businesses with a good relationship with a large bank can obtain a banker’s acceptance. It can be an appealing product for an institution entering a large-value transaction. Like signing a check over to someone, the account holder must have enough cash to execute the transaction.
More than a simple checking account transaction, though, obtaining a BA typically requires an amount of credit to be detailed. There are usually fees involved in obtaining a BA, too.
Who Buys Banker’s Acceptances?
Banker’s acceptances are traded by banks and securities dealers on a secondary market, similar to how debt instruments are traded. They are available for a discount on its face value. The exact value may vary with the rating of the bank that has promised payment on the banker’s acceptance.
How Banker’s Acceptance Is Used
Here’s more detail on how banker’s acceptances can be used.
Checks
Think of a banker’s acceptance as a certified check. It’s a relatively safe way to do a transaction. The money owed is guaranteed on a specific date listed on the BA bill. Credit analysis is usually done to verify the creditworthiness of the issuer, so it’s a bit different than how a bank will verify a check before you deposit it.
BAs are frequently used to facilitate the international trading of goods. A buyer of imported products can issue a BA with a payment date after a shipment is scheduled to be delivered. The seller exporting can then take payment before finalizing the shipment. The exporter in this case can hold the BA to maturity or sell it on the secondary market. Unlike a check, the BA is backed by the guarantee of the bank, not an individual.
Investments
Aside from the import/export market, bankers’ acceptances are used commonly in the investment world. Buyers might purchase a BA and hold it to maturity to effectively earn a rate of return on short-term money. Since BAs are seen as very low-risk products, they are used as a cash-like security.
Still, retail consumers usually won’t be able to purchase a BA in an online or traditional retail bank. The purchase is, as noted above, only available to certain financial entities.
Recommended: What Are Some Safe Types of Investments?
Pros and Cons of Banker’s Acceptance
There are a number of positive aspects of bankers’ acceptances to consider.
Pros
First, the upsides of BAs:
Provides Seller Assurances Against Default
Backed by the guarantee of a bank, a banker’s acceptance is regarded as a high-quality fixed-income security that is often liquid and highly marketable. For importers and exporters, financial transactions can be made to facilitate international trading of goods without the risk that one party goes bust.
Buyer Does Not Have to Prepay for Goods
A banker’s acceptance works like a promissory note so the buyer does not have to prepay. Liability can immediately transfer from the issuer of the banker’s acceptance to the bank. The payment is likely debited only on the due date.
Enhances Confidence in the Deal
Part of the process of issuing a banker’s acceptance is usually having a good credit standing and a relationship with a major bank. Since high-risk customers might not be considered, there is strong confidence in BAs traded. There would be no need for the exporting company to worry about default risk; that lies with the banker. While individual investors often do not engage in BA trading, there are important traditional banking alternatives that feature financial solutions to help facilitate transactions.
Cons
While there are many positive aspects of bankers’ acceptances, there are still some risks for those involved in the transaction and trading of BAs. Consider the following:
Bank May Require Buyer to Post Collateral to Hedge Risk
Collateral is sometimes required for a deal to happen. Collateral provides a backstop should the importer be unable to pay. It can reduce risks to the bank and expedite the deal. Think of it like seller concessions to get a deal done, though collateral is generally not used when buying and selling a home.
Buyer May Default
With a banker’s acceptance, the bank accepts default risk, which can be a downside. The issuing bank typically must honor the payment terms even if the account holder, perhaps an importing/exporting corporation, does not have the cash on the payment date. Not all banks choose to be in this market due to the risk that the buyer could default.
Potential Liquidity Risk
Liquidity risk means an individual or financial institution cannot meet its debt obligations in the short term. Investors may not encounter liquidity risk with a banker’s acceptance instrument, but the issuing bank could have liquidity risk from the importer who must pay. This may be a key consideration for a bank issuing a BA. The secondary market for banker’s acceptance products remains highly liquid.
Pros of BAs
Cons of BAs
Provides assurance vs. default
Bank may require collateral
Buyer doesn’t need to prepay for goods
Buyer may default
Enhances confidence that deal will work
Potential liquidity risk
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The Takeaway
A banker’s acceptance is a debt instrument that plays a key role in well-functioning capital markets. BAs help facilitate international trade through bank guarantees. Knowing about this important fixed-income product type can help individuals understand financial markets and institutions.
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FAQ
What is the difference between a letter of credit and a banker’s acceptance?
A letter of credit is a financial instrument that a bank issues for a buyer (the bank client) guaranteeing that a seller will be paid. A banker’s acceptance, on the other hand, guarantees that the bank will pay for a future transaction, rather than the individual account holder.
What is a banker’s acceptance in a real-life example?
An example of a banker’s acceptance would be that, on April 1st, the Acme Bank sends a BA to Back-to-School Supplies, saying it will make funds available on June 1st for a shipment of goods for their client. On June 1st, the school supply company will be able to withdraw those funds.
How safe are banker’s acceptances?
Banker’s acceptances are a relatively safe transaction for all involved, but the exact degree will vary with the creditworthiness of the bank guaranteeing the funds.
Is a banker’s acceptance a short-term investment?
Banker’s acceptances are considered a short-term investment or debt instrument. They are usually traded at a discount, and they are seen as similar to Treasury bills.
Is a banker’s acceptance a loan?
A banker’s acceptance isn’t a loan. It’s a short-term debt instrument, typically with a maturity date of 30 to 180 days.
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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
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LOS, Processing, Non-QM, IT Tools; Private Equity, Manufactured Homes, and Freddie/Fannie
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LOS, Processing, Non-QM, IT Tools; Private Equity, Manufactured Homes, and Freddie/Fannie
By: Rob Chrisman
Fri, Jun 14 2024, 11:51 AM
“In Florida earlier this week we celebrated with a couple of adult beverages: Metamucil and Ensure.” Every state has its quirks, and every state is made fun of by those in other states. Human nature, right? Here in Chicago, the restaurant scene is on fire, but White Sox fans aren’t happy about the team having the worst record in the majors. While the nation’s fastest-growing cities continue to be in Sun Belt states, new population estimates show that some of the top gainers are now on the outskirts of metropolitan areas or in rural areas. For example, to the west of Chicago, Rockford has become one of the top real estate markets in the nation! And with a hot real estate market usually comes increased lending. What originator can’t learn from hearing another top producer, especially when they love what they do? Today The Mortgage Collaborative’s Rundown (noon PT) will feature Austin Lampson who was just highlighted as one of the top 5 female loan originators in the country in 2023 and have been in the top 1 percent of loan originators since 2014! (Today’s podcast is found here, and this week’s are sponsored by Richey May, a recognized leader in providing specialized advisory, audit, tax, cybersecurity, technology, and other services to the mortgage industry. Hear an interview with Loan Atlas’ Craig Strent on building your origination business based on non-Realtor referral sources.)
Software, Products, and Services for Lenders and Brokers
Transform your mortgage operations with Dragon9 Partners, a leading IT solutions firm with years of hands-on experience in mortgage origination, sales, and servicing. Whether you are a small, medium, or large Lender/Broker, our expert team understands the intricacies of the mortgage industry and is dedicated to delivering innovative technology solutions tailored to your needs. Whether you are looking to streamline your origination process, boost sales efficiency, or enhance servicing operations, we offer comprehensive IT consulting services to drive your success. Partner with us to leverage cutting-edge technology, improve customer satisfaction, and achieve operational excellence. Let Dragon9 be your trusted technology partner in navigating the complexities of the mortgage landscape. Contact us today to learn how we can help you achieve your goals. The first 3 responses will receive a free cybersecurity readiness assessment.
Does your client’s debt-to-income ratio (DTI) hinder their financing options? Castor Financial’s Non-QM loan programs can help. Castor’s unique blended income approach considers various assets, including retirement funds, stocks, and even checking accounts, as qualifying income streams and can be combined with W2 or Bank Statement income streams. And there’s no minimum asset value required. Self-employed borrowers can leverage both personal and business bank statements. Additionally, non-occupying co-borrowers can be added to strengthen applications. Let Castor Financial empower you to unlock financing opportunities for your clients. Visit us for more information.
Registration for the 2024 Loan Vision Innovation Conference (previously the Loan Vision User Conference) is now open! With a focus on innovation, growth, and doing more with less, our new and improved annual conference is taking place in Chicago, Illinois from Monday, September 23rd – Wednesday, September 25th. This conference will deliver highly recognized names in mortgage banking as our speakers, enhanced social networking events, and a fresh agenda for both executives and users and will be aimed at redefining industry standards and setting a new benchmark for excellence. If you’re interested in sponsoring this event, please contact Haleigh Heilman. To learn more about this conference, register, and book your hotel, please visit here.
“Mortgage Brokers! Looking ahead, we are thrilled to present a myriad of exciting growth opportunities. Kind extends an invitation for you to participate in our monthly broker connect, where you will have the invaluable opportunity to gain insights from esteemed industry experts and leaders. This will encompass a comprehensive discussion of the latest market trends and developments within Kind and the mortgage industry at large. Mark your calendars for Wednesday, June 26th, at noon PST (3 PM EST), during which, you will have the privilege of hearing from our very own Kind Ambassadors, including Glenn Stearns – CEO & Founder of Kind Lending, Delfino Aguilar – Chief Production Officer of TPO, & Krish Dhokia – Chief Marketing Officer. The perspectives and knowledge they bring to the table are bound to be invaluable to you and your business. Take a moment to register here.”
Want to soak up some sun instead of being stuck in the office this summer? Make sure your pipeline keeps churning with wemlo® processing support. Processors at wemlo, who support a variety of loan products and lenders, hustle behind the scenes so your business never skips a beat. Plus, lining up wemlo processing support is a breeze. Simply book a 1:1 call, set up your profile, go over the processing agreement, meet your pod (1 manager and 2 processors), and start submitting loans. Ready to trade office hours for beach hours? Enjoy peace of mind knowing your business is in good hands: book your wemlo demo today!
What’s the real cost of your mortgage LOS? Your institution strives to provide a smooth, intuitive application journey that keeps borrowers engaged from start to finish, lowering abandonment rates and promoting portfolio growth. But behind the scenes, issues such as maintenance burdens, resource-intensive tasks, and escalating operational costs may be hindering your ability to effectively support borrowers. Not to mention legacy technology rife with latency issues and excessive vendor integrations, which cause further friction and stress. A holistic examination of your current system is essential to fully understand your total cost of ownership and increase efficiency, improve the borrower experience, and boost ROI. Take the MeridianLink® Mortgage LOS Impact Assessment to see how your mortgage LOS stacks up.
Private Equity Companies and What They Own
Manufactured housing makes up a noticeable portion of the stock in several states. (Yes, I realize that there are varying degrees of manufactured housing, some being very “high end” and some not.) Like doctor and veterinary practices, private equity funds are buying up communities. The Private Equity Stakeholder Project (PESP) and Manufactured Housing Action (MHAction) released the Private Equity Manufactured Housing Tracker, a first-of-its-kind tool monitoring private equity and hedge fund ownership of manufactured housing communities in the U.S.
“Manufactured housing is a vital source of affordable housing for the over 21 million Americans who live in them, many of whom are on fixed incomes. Since the early 2000s, institutional investors such as private equity firms have increased their presence in the manufactured housing market. In 2020 and 2021, they accounted for 23 percent of all manufactured home purchases, up from 13 percent between 2017 and 2019… Residents at corporate-owned communities have reported rent increases of as much as 60 percent after private equity-owned landlords took over their parks. Michigan has the second highest number of private equity-owned manufactured housing parks in the U.S., with 109 parks (33,115 lots). Other states in the top three are Florida and Texas.
Three of the four largest private equity firms in the U.S. own manufactured housing portfolios: Apollo Global Management (Inspire Communities), Blackstone (Treehouse Communities), and The Carlyle Group… Almost half (49 percent) of the private equity-owned parks identified for this tracker were financed by Fannie Mae or Freddie Mac. In contrast, Fannie Mae or Freddie Mac financed just 9 percent of all the manufactured home parks in the U.S.
The Private Equity Stakeholder Project (PESP) is a nonprofit organization with a vision to bring transparency and accountability to the private equity industry and empower impacted communities. Follow PESP at pestakeholder.org and on X/Twitter @PEstakeholder.
Freddie Mac’s Single-Family Seller/Servicer Guide (Guide) Bulletin 2024-7 announces updates pertaining to: Builder forward commitments, Warranty of completion alternatives, First-generation homebuyer mortgages, Flood insurance premium used when calculating the housing expense-to-income and debt payment-to-income ratios. Custom and lender-paid mortgage insurance, and Community land trust mortgages.
As a follow up to Freddie Mac’s April 15 Industry Letter about the treatment of buyer agents’ commissions paid by property sellers or their agents, please read this FAQ .
To stay competitive in the current housing market, it’s vital for lenders to be open to new property types and the new borrowers they may attract. One market with high potential, especially in affordable areas, is properties with accessory dwelling units (ADUs). Freddie Mac allows borrowers to include rental income from an ADU in an amount up to 30 percent of the total stable monthly income used to qualify their mortgage application when the income is generated from a subject 1-unit primary residence. Learn more, view ADU Benefits.
In June, Fannie Mae’s Selling Guide has been updated to add Special Feature Code 887 for loans delivered using a standby commitment, updates the glossary definition of closing costs, expands timeframes for completion of counseling and eliminating Form 1017, retires the requirement for a completed Form 2200 at loan delivery, and other miscellaneous updates. View Fannie Mae Announcement SEL-2024-04 for more information.
Fannie Mae expanded the time allowed to complete housing counseling to qualify for the $500 LLPA credit for HomeReady® and HFA Preferred™ purchase loans. Starting June 5, borrowers can now complete housing counseling from a HUD-approved agency within 12 months prior to loan closing. Visit Fannie Mae’s housing counseling webpage to learn more.
Effective with applications on or after June 7, Pennymac aligned with Freddie Mac Bulletin 2024-6 regarding expanding eligibility for attorney opinion of title letters: Penny Mac Announcement 24-54.
Halcyon officially announced it is integrating with Fannie Mae’s Desktop Underwriter® (DU®) validation service. Learn more about how Halcyon is solving one of the biggest pain points in origination and post-closing. It’s time to switch from the 4506 to Halcyon’s Tax Transcript solution.
Capital Markets
The Fed doesn’t love you. Or maybe I should say that the Fed is “bond-supportive,” as bad news for the economy has become good news for the central bank. A day after Federal Open Market Committee officials voted unanimously to keep the benchmark federal funds rate range at a two-decade high range of 5.25 percent to 5.5 percent, first reached last July, those same officials were indubitably happy yesterday to see initial applications for U.S. unemployment benefits jump (+13k) to the highest level (242k) in nine months. A tight job market, highlighted again in May’s employment data, has been the main driver of caution amongst Fed members about cutting rates before inflation is consistently lower.
Policymakers signaled on Wednesday that they expect to cut rates only once this year, compared to the three reductions that were forecast in March. There is some chatter that price increases slowing in May are a sign that stubborn inflation numbers in the U.S. earlier this year may have been a blip rather than a trend.
Fortunately, for those who dislike volatility, the market is on board with the idea that the Fed will maintain interest rates at current levels. That is a departure from the recent hope-springs-eternal mindset investors had that the Fed would act in a more dovish fashion to tame inflation over the course of this tightening cycle. After we learned Wednesday that a key measure of consumer prices cooled in May to the slowest pace in more than three years (core CPI also slowed more than expected to 3.4 percent year-over-year), data released yesterday showed producer prices unexpectedly dropped in May (0.2 percent) by the most in seven months, a reading that should boost the Federal Reserve’s confidence that inflation continues to moderate. The report will factor favorably in the PCE Price Index, which is the Fed’s preferred inflation gauge.
In addition to the PPI news, a solid 30-year bond yield helped Treasury prices climb yesterday. We know that when prices rise, rates fall, and mortgage rates in the U.S. fell for a second straight week. The average for a 30-year fixed rate was 6.95 percent, down from 6.99 percent last week, Freddie Mac reported yesterday. For context, average 30-year conforming interest rates have only exceeded 7.02 percent on 120 market days in the past 20 years, per Optimal Blue.
May import and export prices led off today’s calendar. (Forecasts were for respective declines of 0.3 percent and 0.2 percent after increases of 0.9 percent and 0.5 percent in April.) Later today brings the first look at June Michigan sentiment (expected to increase), and two Fed speakers are currently scheduled: Chicago President Goolsbee and Governor Cook. We begin Friday with Agency MBS prices better by .125-.250 from Thursday’s close, the 10-year yielding 4.19 after closing yesterday at 4.24 percent on the pleasing news that lower inflation could provide a steppingstone for the Fed to lower rates, and the 2-year at 4.67.
Employment
“Evergreen Home Loans is proud to announce our recognition by Experience.com as a Top 10 Mortgage Company in the Medium Division category for the 2023 Top Performers in Customer Satisfaction! This prestigious honor underscores our commitment to delivering exceptional home loan experiences. Additionally, several of our outstanding loan officers have made the Top 1 percent list for Customer Satisfaction: Cathy Pizzini, Dylan Langei, Kendra Graybeal, Melissa Foster, Nicole Walker, and Siara Jay. These achievements highlight the dedication and excellence of our team. If you’re passionate about providing top-notch customer service and want to join a supportive, dynamic work environment, Evergreen Home Loans is the place for you. Explore current opportunities here. Join us and make a difference every day!”
Home lending leader Mark Allen has joined the eastern United States team of employee-owned USA Mortgage. Allen was recruited to USA by Jim Bromwell, who recently came on board as regional manager. Allen, active in the industry since 2000, will focus on growing the lender’s market share throughout the New England states. “As a 100 percent employee-owned company, USA Mortgage creates a true alignment internally where everyone is invested in its success. Joining Jim’s team also allows me to be part of a group that aligns with my values and reflects a shared passion for the industry,” commented Allen. “Additionally, USA leadership is committed to investing in future growth, specifically New England.” Founded in St. Louis in 2001, USA has offices in 34 states and is licensed in 49 states plus the District of Columbia. To initiate a confidential conversation about joining USA, contact us here.
On the heels of the MBA Secondary in NY and almost 100 client meetings, the AmeriHome team wants you to know that they are listening. Based on client feedback, AmeriHome will focus on developing the products and services that its clients need. To enable that, AmeriHome is hiring in several key areas, including underwriters and a Salesforce Admin! Check out the Careers page for details on all open jobs.
Are you a Retail production team or company looking to be acquired or interested in a “capital partnership” to help drive your organization’s scale across 50 states? A 49-state licensed mortgage lender with a large servicing and strong capital base, seeking to expand retail footprint by partnering with large production teams or regional mortgage banks interested in a capital partnership. The goal of the relationship is to leverage back-office mortgage functions (e.g., secondary, technology, compliance, operations, and licensing) to provide you with long-term production growth opportunities. If you are a strong retail loan origination team feeling limited by management, or an independent mortgage lender looking for new options for your team, we offer a compelling alternative to standard “branch” offerings. Confidential and serious, email Chrisman LLC’s Anjelica Nixt.
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Almost all mortgage rates have dropped. The 30-year fixed rate is 6.50%, and the 15-year fixed rate is 5.75%.
Mortgage rates have been ticking down for days — but you’re probably wondering when mortgage rates will go down enough to make a noticeable impact on your monthly payments. When will rates plummet?
The answer? Probably not in 2024 — but possibly in 2025. The Federal Reserve should only cut the federal funds rate once this year; however, it will likely slash the rate four times in 2025. When the federal funds rate falls, mortgage rates tend to follow suit.
Read more: Mortgage rates dip below 7%, but meaningful declines are still months away
Current mortgage rates
Here are the current mortgage rates, according to the latest Zillow data:
30-year fixed: 6.50%
20-year fixed: 6.08%
15-year fixed: 5.75%
5/1 ARM: 6.66%
7/1 ARM: 6.56%
30-year FHA: 5.91%
15-year FHA: 5.89%
30-year VA: 5.84%
15-year VA: 5.28%
5/1 VA: 6.08%
Remember, these are the national averages and rounded to the nearest hundredth.
Learn more: Is it a good time to buy a house?
30-year vs. 15-year fixed mortgage rates
The average 30-year mortgage rate today is 6.50%. A 30-year term is the most popular type of mortgage because by spreading out your payments over 360 months, your monthly payment is lower than with a shorter-term loan.
The average 15-year mortgage rate is 5.75% today. When deciding between a 15-year and a 30-year mortgage, consider your short-term versus long-term goals.
A 15-year mortgage comes with a lower interest rate than a 30-year term. This is great in the long run because you’ll pay off your loan 15 years sooner, and that’s 15 fewer years for interest to accumulate. But the trade-off is that your monthly payment will be higher as you pay off the same amount in half the time.
Let’s say you get a $300,000 mortgage. With a 30-year term and a 6.50% rate, your monthly payment toward the principal and interest would be about $1,896 and you’d pay $382,633 in interest over the life of your loan — on top of that original $300,000.
If you get that same $300,000 mortgage but with a 15-year term and 5.75% rate, your monthly payment would jump up to $2,491 — but you’d only pay $148,421 in interest over the years.
Fixed-rate vs. adjustable-rate mortgages
With a fixed-rate mortgage, your rate is locked in for the entire life of your loan. You will get a new rate if you refinance your mortgage, though.
An adjustable-rate mortgage keeps your rate the same for a predetermined period of time. Then, the rate will go up or down depending on several factors, such as the economy and the maximum amount your rate can change according to your contract. For example, with a 7/1 ARM, your rate would be locked in for the first seven years, then change every year for the remaining 23 years of your term.
Adjustable rates typically start lower than fixed rates, but once the initial rate-lock period ends, it’s possible your rate will go up. Lately, though, fixed rates have been starting lower than adjustable rates.
Dig deeper: Adjustable-rate vs. fixed-rate mortgage
How to get a low mortgage rate
Mortgage lenders typically give the lowest mortgage rates to people with higher down payments, great or excellent credit scores, and low debt-to-income ratios. So if you want a lower rate, try saving more, improving your credit score, or paying down some debt before you start shopping for homes.
Waiting for rates to drop probably isn’t the best method to get the lowest mortgage rate right now unless you are truly in no rush and don’t mind waiting until the end of 2024 or into 2025. If you’re ready to buy, focusing on your personal finances is probably the best way to lower your rate.
Learn more: How to get the lowest mortgage rates
How to choose a mortgage lender
To find the best mortgage lender for your situation, apply for mortgage preapproval with three or four companies. Just be sure to apply to all of them within a short time frame — doing so will give you the most accurate comparisons and have less of an impact on your credit score.
Dig deeper: Best mortgage lenders for first-time buyers
When choosing a lender, don’t just compare interest rates. Look at the mortgage annual percentage rate (APR) — this factors in the interest rate, any discount points, and fees. The APR, which is also expressed as a percentage, reflects the true annual cost of borrowing money. This is probably the most important number to look at when comparing mortgage lenders.
In regards to your recent “When to Take Social Security” article, you left something out. You can take Social Security early (say, age 62), then invest that money, and your investment will end up better than if you had waited on Social Security until age 67 or age 70.
Interesting! But does the math work? Let’s dive in. Should you take Social Security early and invest it?
What Kind of “Returns” Do You Get For Waiting on Social Security?
Let’s start by looking at Social Security. What kind of “return on investment” do you receive by delaying your Social Security decision?
There’s no easy way to do this today without a spreadsheet, so we will use this Google Sheet to show you some math. (I keep the original file pristine so all readers see the same numbers, but you can go to File –> Make a Copy to create your own copy of the file to play around with.)
For starters, we need to understand how retirees’ benefits change as they age. Depending on their birth year, today’s retirees reach their “Full Retirement Age” (FRA) at 66 or 67 years old. Depending on the age at which they apply for Social Security, they’ll receive a certain percentage of their full benefits, described in the table below.
To make the math easy, we will assume our retiree’s Primary Insurance Amount (PIA)…aka the amount you receive if you wait until FRA…is $1000 per month. So “100%” on the table above equals $1000 per mont
The longer our retiree waits, the higher their monthly payments will be. But what does that look like as an “investment?” And how does inflation factor in?
What About Inflation?
The Social Security Administration adjusts everybody’s Social Security payments yearly to account for inflation. This “cost of living adjustment” is often shortened to “COLA.”
The average COLA adjustment since 1975 has been 3.66%. We need to include that in our spreadsheet too.
Baseline Analysis – No Investments Yet
Let’s start with a baseline analysis. We’ll examine a series of retirees who collect their Social Security monthly, and immediately spend it. They make no investments with their Social Security cash flow. We could conceptualize this as hiding those dollars underneath their mattresses.
We’ll compare results by looking at the total dollar amounts collected over time. This will be our baseline analysis. You can follow along on the spreadsheet tab labeled “No Investment Return (Yet) – Nominal Dollars Only”
The results: in this scenario, early collection only makes sense for a retiree who dies before age 74. This should make sense. We know that delaying Social Security makes more and more sense the longer someone lives.
Let’s add in investment returns.
Analysis 1: Investing in a 4.7% Savings Account
Let’s consider a retiree who takes all of their Social Security income and deposits it into a savings account bearing 4.7% annual interest.
Why 4.7%? That’s the average overnight Federal Funds rate since 1960, and modern-day high-yield savings accounts tend to offer interest rates that are closely correlated to the Fed Funds rate.
Note: if your personal pile of cash isn’t in a high-yield savings account, you should ask yourself why that is…
The results: if you pass away at age 77 or earlier, collecting earlier makes sense. Otherwise, waiting until FRA or later likely makes sense. This is no different than “traditional” Social Security advice.
Analysis 2: Investing in a “Standard” 60/40 Portfolio
What if our retirees put their money in a tried-and-true 60/40 portfolio?
From 1950 until today, that kind of diversified 60/40 portfolio has returned an average of 9.3% per year.
The results: Whoa! As shown on the “A2” tab, collecting as early as possible makes sense for anyone who would pass away before age 88.
We know, on average, most 62 years olds are going to pass away well before age 88. The smart, probabilistic thing to do then, is collect Social Security as early as possible and invest it in something like a 60/40 portfolio (or, something with greater returns).
But wait…because I’ve only showed you half the story. And that’s a major problem.
Big Problem: What’s the Risk?
If we zoom out on reader DT’s idea as originally stated, we should confidently conclude: OF COURSE it makes sense! If you have sufficiently high investment returns, you should always start as early as possible.
Even if the benefit of delaying Social Security was 20% per year, but I had an investment that paid me 40% per year, I’d rather start collecting as soon as possible and get the money invested. Given sufficiently high returns, you always want to get the compound growth started.
But we must return, once again, to a foundational pillar of investing and oft-repeated maxim of The Best Interest: Risk and return are intrinsically connected.Returns are not “free.” They are compensation for taking on investment risk.
Whenever an investor compares returns alone, without also comparing the risks involved, they’re making an incomplete analysis. DT’s original question only considers return. It doesn’t consider risk.
What Comparison Makes Sense?
The benefits of delaying Social Security are guaranteed by the U.S. government. That’s very low risk. What kind of investment risk should we compare that to?
I see two viable options.
First, why does Warren Buffett invest all of Berkshire Hathaway’s extra cash into U.S. Treasuries, instead of an S&P 500 index fund? Doesn’t he know the S&P 500 has much better long-term returns?!
Answer: U.S. Treasuries are as risk-free as anything in the investing universe, backed by the full faith and credit of the U.S. government. As long as Uncle Sam pays debts, U.S. treasuries are risk-free. The S&P 500 is far from risk-free, and Buffett knows it. He wants his cash to be safe and ready for deployment at a moment’s notice. The S&P 500 cannot fulfill that need.
The first logical comparison today, then, is to use a true “risk-free” rate as our investment return. Something like a high-yield bank account (FDIC insured) or short-term U.S. Treasury is appropriate. Conveniently, we already did that in Analysis #1, where our conclusion is no different than traditional Social Security advice: the “break even” point occurs in the late 70s.
Note: this is reason for the concept of “risk-adjusted returns.”To compare only the returns of two investments is not an apples-to-apples comparison.
The second option is to show the downsides of Analysis #2. That is, to show how 9.3% per year from a 60/40 portfolio is far from a guarantee. More specifically, I’d like to show how the downside risk of a 60/40 portfolio could turn our result on its head. What happens if we suffer some bad markets during our early Social Security period?
Looking at historical returns, a 60/40 portfolio has had 10-year periods with returns below 2% per year. What if we started our Social Security timeline with that kind of low return, and then made up for it at the end of the analysis? That’s what I show on our spreadsheet on the A3 tab.
The results? The 60/40 “solution” comes with risks! In this scenario, “taking Social Security early and investing it” only worked out if our retiree died before age 75. That’s not a good outcome. Doubly so if Social Security is a safety net or backstop in your financial plan.
To Apply or Not Apply
If your Social Security is “play money” in your financial plan, and you’re ok with risking a loss, then I can see the merit and appeal of DT’s proposal. You can apply for Social Security early, invest it (reasonably), and the odds are in your favor that you’ll end up in a good spot.
But it’s no guarantee.
And the entire point of the Social Security system is to provide a guaranteed benefit to retirees. If Social Security plays even a minor role in your financial plan, I would strongly discourage putting that money at investment risk to eek out extra returns.
When we make a level comparison by using a risk-free rate, like in Analysis #1, we see there is no net benefit to taking Social Security early to invest it.
Thank you for reading! If you enjoyed this article, join 8000+ subscribers who read my 2-minute weekly email, where I send you links to the smartest financial content I find online every week.
-Jesse
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Victor Ciardelli beamed as his mortgage company, Chicago-based Guaranteed Rate, launched a “financial wellness” and “personal well-being” app last fall before a live audience in Times Square with wellness celebrity Deepak Chopra.
“Something we are passionate about at Guaranteed Rate is caring about people and their overall well-being,” Ciardelli said in a video of the event posted online. “We wanted to make sure that we did something to help people in their general stress and alleviate pain.”
But in the days following the launch of the app, which offers home loan applications and other financial services alongside yoga classes and nutrition advice, Ciardelli wasn’t happy. Yelling at executive leadership on company calls, he referred to his employees as “failures,” complained that the team did not show him from a particular camera angle and said “Marketing is a f−−−ing disaster,” according to two executives who were on the calls.
Despite Ciardelli’s public remarks on the importance of personal well-being, many former employees told the Tribune they experienced or witnessed persistent verbal abuse and a misogynistic environment while working at Guaranteed Rate. As part of a Tribune investigation, reporters interviewed nearly 80 former employees and reviewed court records, internal company emails, written exit interviews and text messages.
Many of the former staff members who spoke with the Tribune described Ciardelli, the company’s president, CEO and founder, as a boss who was quick to berate, swear at and demean employees.
“Every person that works directly under Mr. Ciardelli is terrified of his potential anger outbursts,” one former assistant wrote to human resources after she was let go from the company a couple of years ago, according to an email reviewed by the Tribune.
Some former employees who spoke with the Tribune said they were driven to seek mental health care because of the work environment at the company; one former worker said she contacted a suicide hotline last year.
Multiple women who used to work at Guaranteed Rate, meanwhile, described working in a sexualized atmosphere where some male loan officers and managers made sexually explicit remarks to female employees, hit on them in the office or at work events, and commented inappropriately on their appearance — even, in one case, encouraging a woman to use her looks to help close a loan.
In February, a woman who used to work as a loan officer at Guaranteed Rate filed a lawsuit against two high-producing loan officers at the company, alleging sexual harassment and gender discrimination. Her complaint alleges one of the male loan officers sexually harassed her at a corporate event, that the other loan officer pressured her not to report the incident to human resources, and that for the remainder of her employment the man who made the remark used “gender-based and demeaning slurs to refer to” her and other women at the company.
Other former employees said they did not bring their complaints to human resources because they thought Ciardelli or other executives and managers meddled in the department’s business and might retaliate, with at least two former employees saying they’d observed how company leaders protected certain staff members. Others said they did complain but felt the department didn’t take the information seriously.
In response to a detailed list of questions from the Tribune, Ciardelli and Guaranteed Rate vehemently denied all of these allegations, describing the company as a positive workplace environment where women in particular are supported. The firm went to remarkable lengths to dispute the allegations, including sending the results of a worker satisfaction survey it conducted and forwarding more than 80 testimonials from current and former employees. Among them were five of Ciardelli’s current or former assistants, as well as numerous male and female executives praising his leadership and support.
The company also retained an outside law firm that, even before receiving the reporters’ list of questions, threatened to sue the newspaper for defamation.
Guaranteed Rate, whose corporate headquarters is in Chicago’s North Center neighborhood, has grown tremendously since its founding in 2000 to become one of the largest mortgage lenders in the country based on loan volume, according to industry news and data provider Inside Mortgage Finance. Its name has adorned the White Sox stadium since 2016, and as recently as 2018, Guaranteed Rate was named a Chicago Tribune Top Workplace — a distinction based on surveys conducted by an outside company, with no input from editorial staff on the selection.
Guaranteed Rate CEO Victor Ciardelli prepares to throw out the ceremonial first pitch at a White Sox home game in August 2016. The ballpark would be renamed after his company later that year. (Chris Sweda/Chicago Tribune)
Jason Scott, a former top-producing loan officer and director of VA lending, which provides home loans to military veterans and active-duty service members, at Guaranteed Rate said his earlier years at the company — when lower mortgage rates fueled industry growth — were positive. But Ciardelli’s outbursts and verbal abuse of employees grew more noticeable, he said, when rising interest rates started to erode those gains, especially after the boom years of the COVID-19 pandemic.
“I think crazy success just brings out who the real people are,” said Scott, who reported to Ciardelli in his director role and now works for CrossCountry Mortgage, a competitor of Guaranteed Rate. “What did you sacrifice to get there? Did you sacrifice your soul or your core values?”
Many other former employees who spoke with the Tribune did so on the condition they would not be named in this story, saying they feared Guaranteed Rate would sue them. Guaranteed Rate has filed lawsuits against former employees to claw back signing bonuses; it also has sued competitor New American Funding and former employees who have hired former Guaranteed Rate workers, accusing them of unlawful poaching.
Ciardelli declined to be interviewed without his attorney for this story. In response to written questions provided by the Tribune, he and the company suggested the criticism of Guaranteed Rate came from disgruntled employees who could not succeed in a demanding work environment within a challenging industry, or from people who now work for a competitor and therefore would benefit from disparaging the company.
“We hold ourselves and our team members to an incredibly high standard and are not apologetic about that,” Ciardelli said in his written responses, sent through the outside law firm retained to handle communications with the Tribune. “We also recognize … that to achieve great success, one must embrace a full ownership for their actions, both successful and otherwise to achieve growth and most important optimally serve our customers. We promote a transparent culture that supports all our team members toward that goal and welcome constructive criticism. As a result, we are not for everyone.”
Ciardelli specifically denied berating staff, yelling at executives after the app launch or ever calling employees “stupid” or “failures.” He quoted the company’s chief operating officer, Nik Athanasiou, as saying: “I have worked with Victor for 15 years. No one is in more meetings with him than me. I do not ever recall an instance where Victor was abusive toward another employee.”
Ciardelli also pointed to the company’s anti-discrimination and anti-harassment policies and said neither he nor any other executive interfered with human resources.
In response to questions from the Tribune about women’s complaints, including being subjected to sexually explicit comments and working in a “boys club” atmosphere, Ciardelli wrote that such allegations are “simply not true.” The company “has not, does not, and would not objectify women or put them in uncomfortable personal or professional situations,” he wrote.
Ciardelli also highlighted the large number of female loan officers working at the company, their professional success and the testimonials from female employees. When the Tribune asked to speak with four of those women, only one — Rola Gurrieri, the company’s New Jersey-based chief fulfillment officer — agreed to be interviewed without outside counsel or management present.
Regarding the lawsuit filed by former Guaranteed Rate loan officer Megan McDermott, the company told the Tribune it had “found no evidence supporting Ms. McDermott’s allegations of sexual harassment or gender discrimination” after conducting a “comprehensive investigation.”
Guaranteed Rate also sent a general statement detailing the company’s business philosophy, which includes a “fierce commitment to excellence.” Employees who do not “meet our core values or our quality standards” find it challenging to maintain job satisfaction at the company, it said.
“Many of these employees walk away not feeling good about the company which is a natural emotion when faced with a reality that their standards and the company standards are not aligned,” the statement said.
But many of the former employees who spoke with the Tribune described a cutthroat work culture they said could be frightening and upsetting, with several attributing that culture to Ciardelli’s laser focus on making money and growing Guaranteed Rate.
A sign is installed at the White Sox stadium in October 2016 to proclaim its new name: Guaranteed Rate Field. (Zbigniew Bzdak/Chicago Tribune)
The former assistant who emailed human resources asked not to be identified in this story, fearing it might jeopardize her current job or trigger retaliation from Ciardelli. In that email, the woman wrote that she was “constantly on edge and terrified to have an interaction with Mr. Ciardelli” and that she had “consoled each assistant on his team that endured the wrath of Mr. Ciardelli’s behavior.”
“I hope that my experience will open your eyes,” she wrote.
Flying too close to the sun
In an interview with the Tribune in 2014, Ciardelli made plain his ambition to grow the company.
“If you can’t handle it, you shouldn’t be here,” Ciardelli said. “Instead of feeling like, oh, we care about people’s feelings and all that, it’s all about results.”
In the same article, Ciardelli said he worked constructively with his employees when issues arose at work. “There’s no drama involved; there’s no yelling,” he said. “Let’s fix the issue and move on.”
But multiple former executives and employees told the Tribune Ciardelli regularly yelled at and verbally attacked executives and other employees in person and on company calls, sometimes in front of hundreds of people, with the calls following the app launch just one example.
Some former and current employees told the Tribune they tried to avoid Ciardelli because they were scared of his temper.
Scott, the former director of VA lending who worked at Guaranteed Rate from 2017 until he resigned in 2022, splitting his time between offices in Hawaii and Colorado, called Ciardelli a “bully.”
Scott told the Tribune that, during one call, Ciardelli took an executive “to the woodshed and just eviscerated him verbally,” saying things such as “I can’t believe you are this stupid.”
“(Victor) throws the grenade and then he leaves the room,” not giving people a chance to explain or talk through the issue, Scott said.
At the time of Ciardelli’s 2014 Tribune interview, Guaranteed Rate had 2,500 employees nationally, 1,050 of whom were based in Chicago, according to Tribune archives.
The company grew to employ 9,708 people nationwide at its peak in 2021, Guaranteed Rate told the Tribune in May. Part of the company’s growth stemmed from its acquisitions of other mortgage companies: Manhattan Mortgage and Superior Mortgage in 2012 and Stearns Lending in 2021.
Victor Ciardelli, shown in 2014 at Guaranteed Rate’s headquarters, told the Tribune that year that he had ambitious plans for the company and “if you can’t handle it, you shouldn’t be here.” (Abel Uribe/Chicago Tribune)
Guaranteed Rate also partners on mortgage services with some of the largest real estate companies in the country. Including the people working in those partnerships, Guaranteed Rate had 14,264 employees at its height in 2021.
Like other mortgage companies, Guaranteed Rate has suffered a significant decline in business over the last two years, stemming from mortgage rates that have more than doubled from their record lows during the pandemic.
As mortgage rates soared in 2022 and 2023, the firm implemented thousands of layoffs, with only 3,871 workers remaining as of April, or 5,756 among all its companies, excluding contractors, as of May, according to the company.
Yet Ciardelli’s volatile behavior predated the stressful times in the housing market, according to some people who worked for Guaranteed Rate. Many people who “fly too close to the sun” — a metaphor some employees used to describe working directly with Ciardelli — eventually leave, they said.
People who work in personal and executive assistant roles for Ciardelli rarely last long in their jobs, with many leaving after less than a year, former employees said. Some referred to Ciardelli’s assistant position as a “revolving door,” and the LinkedIn profiles of multiple former assistants show short stints with the company.
More than two dozen executives and senior loan officers have left the company over the last decade, with a significant exodus occurring in the past two years. Multiple former executives and loan officers — including Scott — told the Tribune they left because of Ciardelli’s verbal outbursts and what many described as a workplace where they felt bullying and misogyny were tolerated. Most now work for competitors.
Ciardelli and other executives sometimes would disparage people who left the company, according to Scott.
“I would be like ‘Guys, did anybody ever think about reaching out to them before they left and having an exit interview with them?’” Scott said. “You are talking about a person that was a top producer here that you loved them as long as they produced, and now that they leave, they are an enemy? … They are leaving for a reason.”
In Ciardelli’s written responses to Tribune questions, he said allegations of a toxic work environment or bullying on his part are “not aligned with Guaranteed Rate or my leadership.” He said neither he nor other executives have disparaged former employees when they left the company.
In response to a question about assistant turnover, Ciardelli wrote that he has worked closely with five “primary” assistants since 2000. “As is the case with any demanding support roles, there has been some turnover with secondary and tertiary assistants, but nothing that is abnormal or unexpected,” he wrote.
One testimonial sent to the Tribune was from Melissa Czaszwicz, who said she worked for Ciardelli as an executive assistant in the early 2000s. She wrote that she had a positive experience working closely with Ciardelli, who she said was especially supportive when she had children.
“Never did I witness anything inappropriate or out of line,” said Czaszwicz, who still works at Guaranteed Rate.
‘Mental health has suffered’
Some former employees who spoke with the Tribune said they were driven to seek mental health support during and after their time at the company because of the negative work environment they experienced at Guaranteed Rate.
Most of those who shared their experiences worked for an executive who has a close working relationship with Ciardelli. Former workers said this executive also verbally abused staff and was prone to volatile mood swings.
One told the Tribune she texted and called a suicide hotline last year while working at the company because of verbal abuse from the executive; she shared the texts she sent with the Tribune.
In her resignation email, sent to the executive and to the human resources department last year, she wrote: “My mental health has rapidly declined due to the way I have been treated and spoken to in the last couple of months.”
Another employee from the same team wrote in a 2019 resignation letter sent to the executive, human resources, Ciardelli and others that his “mental health has suffered.”
Founded in 2000, Guaranteed Rate grew to become one of the largest mortgage lenders in the country but has suffered a decline in business as mortgage rates have soared in the last two years. (Brian Cassella/Chicago Tribune)
In the resignation email and in an interview with the Tribune, the former employee said his boss gave him the runaround when he asked for time off to attend his mother’s chemotherapy appointments and complained to other employees about his requests.
Other employees discouraged him from requesting leave directly from human resources, warning him he would be fired if he went around the executive, according to the email.
Alyssa Ortiz, another former employee, said working with this executive was like being in an “abusive” relationship, being yelled at one minute and being invited for drinks the next.
“Everyone has gotten … chewed out and left crying,” said Ortiz, who worked for Guaranteed Rate from 2017 to 2019.
Ortiz told the Tribune that human resources and Ciardelli had been notified of this executive’s verbal mistreatment of employees but did nothing. She and about a dozen other former employees told the Tribune they felt Ciardelli protected this executive because of their working relationship.
In a written exit interview from 2020, one employee from the same department described how the executive would discuss former employees’ exit interviews with current employees.
“This created a fear for us to go to HR for anything moving forward,” the employee wrote.
Ciardelli said the company was not aware of any incident in which an executive read former employees’ exit interviews aloud; he said Guaranteed Rate “would never support this practice.”
Dozens of employees have left the executive’s department since 2017, according to interviews with former workers and LinkedIn profiles. The executive has since been promoted, the executive’s LinkedIn profile and the company’s website show.
In 2018, the head of human resources at the time took away the HR representative working with the executive’s department because of “risks” the executive posed to the company, according to an email reviewed by the Tribune.
“I can’t in good conscience keep allowing (the executive) to drag other employee (sic) into … schemes,” the former HR head wrote. “And by schemes I mean risky bull−−−−.” The department would have no assigned human resources representative after that, according to the email.
In correspondence with the Tribune, Guaranteed Rate described the company as a positive workplace where abuse and harassment are not tolerated and where complaints to human resources are taken seriously.
“We are not perfect by any means, but we do work hard to listen to our employees and make sure they feel supported,” a company spokesperson wrote in an email to the Tribune in April. “Most of all, we have no tolerance for any form of bullying, harassment or mistreatment. It is not who we are or who we want to be.”
Some of the employee testimonials provided by Guaranteed Rate expressed similar sentiments. For example, Mohamed Tawy, a branch manager and senior loan officer who has been with Guaranteed Rate for three years, wrote that the culture at the company is the best he has experienced in his 15-year career.
In an interview with the Tribune, Tawy said: “As a top producer … and I’m also a minority myself, I haven’t felt anything or seen anything that makes this company in any way negative for anybody that’s different. … I’ve seen here all that matters is that you do a good job, your production is good and that you follow the protocols and the rules, and I’ve seen people succeed with that more than any company I’ve been with.”
The Guaranteed Rate spokesperson also shared the results of an employee experience survey conducted in February. According to the company, the average rating for the culture at Guaranteed Rate was 8.49 out of 10, with nearly 75% of 3,745 employees responding. Those ratings were based on employees’ stated level of comfort providing feedback and/or concerns, how much they felt supported by the company in maintaining a healthy work-life balance and their sense of Guaranteed Rate’s commitment to promoting diversity and inclusion.
The email from the spokesperson said the company received “a countless number of positive comments and appreciation for their leaders, teams and our overall culture.”
In response to Tribune questions, Guaranteed Rate said in May that the survey was anonymous and it was analyzed by its “employee experience team.” The company did not provide the Tribune with a complete set of responses from the survey, but it volunteered that employees used the word “toxic” to make a negative comment about Guaranteed Rate in only 14 of the more than 5,000 written responses provided to three open-ended survey questions.
‘Mortified and disgusted’
Megan McDermott, a single mother of three, met her supervisor at Guaranteed Rate, Jon Lamkin, in person for the first time at a corporate event in December 2015, according to the lawsuit she filed in February.
When Lamkin heard the age of her oldest child, the suit alleges, he said: “You should have known better than to let some guy’s d−−− c−−− inside you.”
According to her lawsuit, McDermott reported the comment to Joseph Moschella, a regional manager and senior loan officer at Guaranteed Rate who was responsible for McDermott’s region while she worked at the company. Moschella, the suit alleges, “pressured” her not to make a formal complaint of sexual harassment to human resources.
McDermott told the Tribune she was “mortified and disgusted” after Lamkin made the comment.
“The irony here is that Jon should have known better than to treat an employee the way he did rather than telling me I should have known better to become a single mother at 20 years old,” McDermott said, “which is vile. … He set the tone the first day I met him of the power Joe and Jon had over my career.”
Megan McDermott, shown in March in New Jersey, has filed a lawsuit alleging she was “subjected to a sexual and gender-based hostile work environment” at Guaranteed Rate and did not receive the same opportunities, treatment and pay as male loan officers. (Brian Cassella/Chicago Tribune)
As McDermott went on to become a top-producing loan officer for Guaranteed Rate in New Jersey, her suit alleges Lamkin subjected her to abuse by “regularly screaming at her and using gender-based and demeaning slurs to refer to” her and other women at the company.
Her lawsuit alleges she was “subjected to a sexual and gender-based hostile work environment” by Guaranteed Rate, Lamkin and Moschella. Her suit also alleges McDermott did not receive the same opportunities, treatment and pay as male loan officers, which some other female loan officers told the Tribune reflected their own experiences as well.
McDermott did not lodge a complaint after Lamkin’s comment because she “believed she would be retaliated against” if she did so, the suit states. When she did report to HR around 2019 that Lamkin had engaged in “abusive behavior,” the department “failed to do anything to investigate or curtail Defendant Lamkin’s behavior,” the complaint alleges.
“Joe encouraged me not to go to HR because of the damage it would do to Jon’s career,” McDermott said. “Ultimately, all that they were worried about was Jon, his reputation and his career versus reporting inappropriate behavior.”
Guaranteed Rate told the Tribune in its May response that Lamkin’s comment was “nothing more than a single off-color joke,” that McDermott accepted an apology from Lamkin and that Moschella “encouraged” McDermott to contact human resources if she was “still upset.”
The company said it “could not find any record of Ms. McDermott making any form of complaint to the company’s human resources department in 2019, either verbally or in writing.”
McDermott told the Tribune she helped build Guaranteed Rate’s business in north Jersey from the ground up and said she loved the work until she found out she was not being treated equally as a woman.
“I believe management did not want to see me succeed, didn’t take me seriously and made decisions that negatively affected me and my children financially,” said McDermott, who now works for CrossCountry Mortgage, a competitor. “I ultimately left GR because I could no longer work in an environment where I was not valued and leadership felt that they could exploit me.”
Moschella and Lamkin are still employed at Guaranteed Rate. They did not respond to a Tribune request for comment. Guaranteed Rate told the Tribune in May that it had investigated McDermott’s allegations of sexual harassment and gender discrimination and found that “there is no evidence that Mr. Lamkin or anyone else at Guaranteed Rate ever created a hostile work environment for women.”
Guaranteed Rate also said in a statement that it complies with state and federal equal pay laws. The company said an “outside law firm” had reviewed its 2023 pay data and found it compliant with state equal pay laws.
In his written responses, Ciardelli highlighted the high percentage of female loan officers at the company in comparison to its competitors and said “our women originators thrive more than at any mortgage company in the industry.”
Employee statements provided through Guaranteed Rate’s attorneys included testimonials from dozens of women. Some noted the existence of the company’s employee resource group for women, GROW, while others cited the presence of women in leadership roles throughout the company.
“In addition to my professional growth I’ve experienced, I am equally grateful for the respect and dignity with which I have been treated as a woman in the workplace,” Jaime Kinman, a senior loan officer, said in her statement. “In an industry where gender biases still exist, I have never once felt marginalized or overlooked because of my gender.”
Gurrieri, the company’s chief fulfillment officer, said in an interview with the Tribune that she “never one time” experienced misogyny at the company.
“I got promoted when I’m six months pregnant,” she said. “That’s unheard of.”
Gurrieri, who has worked for Guaranteed Rate for more than six years, described Ciardelli’s leadership style as “extremely passionate.”
“There’s never been a day where I ever felt disrespected or not appreciated,” she said.
According to a former top executive who reported to Ciardelli for many years and a former human resources employee, a handful of loan officers at Guaranteed Rate were known sexual harassers, making women feel uncomfortable with inappropriate touching and unwanted advances in work settings.
But that behavior was rarely addressed, the former workers believed, because the men were friends with Ciardelli or were high-producing loan officers — each responsible for bringing in tens of millions of dollars in loan volume. Some of these loan officers still work at Guaranteed Rate.
Ciardelli called these allegations “simply not true” and said they were contradicted by the employee testimonials provided through the company’s attorney.
“They are also inconsistent with the recollections and experiences of multiple former HR professionals,” Ciardelli wrote.
A ‘sex-driven’ culture
In interviews with the Tribune, multiple former employees described a “boys club” atmosphere at Guaranteed Rate; Scott, the former director of VA lending, said there was “a lot of misogyny.”
Jessica Moreno, a former Chicago employee who started at Guaranteed Rate at age 23, said she was the first in her family to get a corporate job. Within a year of starting her job, she said, she was paying the mortgage on her family home.
But in her department, Moreno said she experienced a “sex-driven” culture.
“All the guys were just like, tongues on the floor,” said Moreno, who worked for the company for about four years starting in 2014. Her workplace was “like a men’s locker room, and women were in it,” she said.
Jessica Moreno, shown in April in Arizona, worked for Guaranteed Rate for about four years starting in 2014. She said male co-workers and managers hit on her and made comments on her appearance. It was “like a men’s locker room, and women were in it,” she said. (Brian Cassella/Chicago Tribune)
Male co-workers and managers would hit on her and make comments on her appearance, calling her pretty, Moreno said. Comments made at Christmas parties or happy hours could be crasser, she said.
“You’ll get, ‘Oh, I’ve always wanted to f−−− you,’” she said.
Moreno said she once overheard a male manager describe a woman who had interviewed for a job as a “fox.” Another time, she said, a manager invited a female massage therapist to the office; Moreno remembers male co-workers commenting on the therapist’s body, too.
Soon after she’d started at Guaranteed Rate, Moreno said, she met with HR to make a complaint about a manager who swore at and belittled her. The HR representative brushed off her concerns in that meeting, she said.
“After that, I felt so discouraged to never even speak up again,” Moreno said.
Moreno ended up leaving her position before taking a job working for a Guaranteed Rate loan officer; she said she was terminated after clashing with the loan officer’s assistant.
Some female former employees of Guaranteed Rate said they understood looks to be a currency within the company.
One former Chicago employee said a manager encouraged her to text a selfie to a client after hearing the client flirt with her over the phone and say he’d be inclined to speed up the loan process if he knew what she looked like.
The employee said she sent the selfie, and the manager then pushed her to go along with the client’s harassment until the loan closed, she said.
After receiving the photo, the client responded, “As pretty as you are I can’t believe some man hasn’t run off with you just howling away,” in a text reviewed by the Tribune. Later on, after sending her forms, the client texted her: “You said I would get another pic when I sent you the forms so?”
The employee said another manager in her division would frequently flirt with her and comment on her appearance. He once texted her to “stop losing weight damn it” and another time texted her that she “broke (his) concentration,” according to texts reviewed by the Tribune.
Another former Chicago employee remembered a manager telling her, while she was pregnant with her first child, “Whatever you do, don’t get a C-section — you’ll never wear a bikini again.” The employee went out on maternity leave days later. She said she did end up needing a C-section and remembers the manager’s comment echoing in her head as she was wheeled back for surgery. Two people the woman told about the incident at the time corroborated her account in interviews with the Tribune.
Several former employees in the marketing department, including two men, told the Tribune Ciardelli made comments about workers’ ages. One employee got Botox and fillers after Ciardelli told employees they were “too old” and likened the marketing department to his “grandmother’s mortgage company,” according to former marketing department employees.
In his written responses, Ciardelli said “Guaranteed Rate is committed to fostering an environment that promotes diversity, equity, inclusion, and accessibility. We maintain a comprehensive set of employment policies aimed at providing a work environment free of unlawful harassment and discrimination, where all employees treat one another with dignity and respect.”
Guaranteed Rate’s corporate headquarters is in Chicago’s North Center neighborhood in a building with a rooftop gathering space. (Brian Cassella/Chicago Tribune)
A spokesperson said in the April 1 email sharing the employee survey results that the company had launched “even more initiatives to ensure we have a positive work environment,” including anti-harassment training, training for the human resources team “to take proper and appropriate steps and best practices for investigating and responding to employee complaints” and reminders to employees on how to report harassment or abuse.
“Our executive team has emphasized to Human Resources that all complaints should be investigated, and any form of harassment and misconduct should be dealt with swiftly – and all managers and employees who are not acting in accordance with our values be rooted out of our organization,” the spokesperson wrote.
In the company’s May responses, it said these initiatives were launched in 2023 and were to “expand and enhance” the existing training program.
All Guaranteed Rate employees must complete “harassment and discrimination prevention training” upon being hired and on an annual basis thereafter, according to the company’s May response. The company said Guaranteed Rate has an “anti-retaliation” policy that prohibits retaliation against employees who report alleged harassment or discrimination or participate in an investigation into the conduct. The company also noted it has an ethics hotline through which employees can make anonymous complaints.
“We respect and treat all employees equally no matter their sex, color, or creed,” Ciardelli wrote.
In the last 10 years, Guaranteed Rate has not settled any lawsuits involving claims of a hostile work environment, according to the company. Guaranteed Rate’s response stated that within that time frame, the company settled six claims involving allegations of a hostile work environment, including arbitration cases as well as claims filed with the Equal Employment Opportunity Commission and state and local agencies. The majority of those claims were brought by male employees, and one was resolved in Guaranteed Rate’s favor, the company said.
Guaranteed Rate employees are asked to sign mandatory arbitration agreements when they are hired, but sexual harassment claims and claims filed with the EEOC and similar state agencies are not subject to arbitration, according to Guaranteed Rate’s May responses.
‘Positive thinking’
Publicly, Ciardelli presents himself as a champion of a positive work environment — an image the company has encouraged employees to promote.
In an email sent in February by a company executive and obtained by the Tribune, employees were encouraged to share a Forbes article featuring Ciardelli; the email provided step-by-step instructions for posting it on social media.
The story, published Feb. 7, was titled “Guaranteed Rate Founder Is All In On ‘Positive Thinking’ This 2024” and described his leadership style as “Chicken Soup for the Mortgage Industry.”
“I communicate the power of positivity and gratitude to everybody around me: employees, friends, family members, everyone,” Ciardelli was quoted as saying.
Less than 24 hours after it went live, the article disappeared from the Forbes website. The site provided no explanation, but one former Guaranteed Rate employee told the Tribune former workers had written to the author about factual inaccuracies.
On Feb. 8, a Guaranteed Rate executive sent another email encouraging employees — again with step-by-step instructions — to delete any social media posts linking to the article.
“We are working with Forbes to resolve and will let you know when it will be reinstated,” the email said. “We apologize for the inconvenience, and we will send out a new link as soon as it’s available.”
The Forbes contributor declined to comment for this story. Forbes told the Tribune the article was taken down because it did not adhere to the company’s “editorial guidelines” and did not respond to further questions.
The article has yet to be republished, but Guaranteed Rate still wants people to read it. The company shared it in a PDF on its LinkedIn page.
Inside: Learn what 50 an hour is how much a year, month, and day. Plus tips to budget your money. Don’t miss the ways to increase your income.
You’re probably wondering if I made $50 a year, how much do I truly make? What will that add up to over the course of the year when working?
Is my $50 an hour take home pay comparable to others in my industry? Is $50 an hour paycheck a good salary?
First of all, this is a wage you can actually live on and should be able to thrive and reach your financial goals. Annually $50 an hour should help you to breathe easier with your finances. You might wonder how can I start to increase my hourly wage to $55, $60, or $65 per hour?
Most of the hourly jobs that pay over $50 an hour do not require a degree, which is great news! Those paid on a salary basis tend to have a college degree and do not even calculate their hourly wage.
In this post, we’re going to detail exactly what $50 an hour is how much a year. Also, we are going to break it down to know how much is made per month, bi-weekly, per week, and daily.
That will help you immensely with how you spend your money. Because too many times the hard-earned cash is brought home, but there is no actual plan for how to spend that money.
By taking a step ahead and making a plan for the money, you are better able to decide how you want to live, make sure that you put your money goals first, and not just living paycheck to paycheck struggling to survive.
The ultimate goal with money success is to be wise with how you spend your money.
If that is something you want too, then keep reading. You are in the right place.
$50 an Hour is How Much a Year?
When we ran all of our numbers to figure out how much is $50 per hour is as an annual salary, we used the average working day of 40 hours a week.
40 hours x 52 weeks x $50 = $104,000
$104,000 is the gross annual salary with a $50 per hour wage.
As of June 2023, the average hourly wage is $33.58 (source).
Let’s Break Down Of 50 Dollars An Hour Is How Much A Year
Typically, the average workweek is 40 hours and you can work 52 weeks a year. Take 40 hours times 52 weeks and that equals 2,080 working hours. Then, multiply the hourly salary of $50 times 2,080 working hours, and the result is $104,000.
That number is the gross income before taxes, insurance, 401K, or anything else is taken out. Net income is how much you deposit into your bank account.
You cross the 6 figure salary, which is a huge step with your income! That is way higher than the average $60000 salary threshold, which is desired to become middle-income worker.
Work Part Time?
But you may think, oh wait, I’m only working part-time. So if you’re working part-time, the assumption is working 20 hours a week at $50 an hour.
Only 20 hours per week. Then, take 20 hours times 52 weeks and that equals 1,040 working hours. Then, multiply the hourly salary of $50 times 1,040 working hours and the result is $52,000.
How Much is $50 Per Month?
On average, the monthly amount would average $8,667.
Annual Amount of $104,000 ÷ 12 months = $8,667 per month
Since some months have more days and fewer days like February, you can expect months with more days to have a bigger paycheck. Also, this can be heavily influenced by how often you are paid and on which days you get paid.
This helps a financially stable person manage their finances without a bunch of stress. And if you are making $100k a year and still stressing about money, then you need to learn to drastically cut your expenses.
Work Part Time?
Only 20 hours per week. Then, the monthly amount would average $4,333.
How Much is $50 per Hour Per Week
This is a great number to know! How much do I make each week? When I roll out of bed and do my job, what can I expect to make at the end of the week?
Once again, the assumption is 40 hours worked.
40 hours x $50 = $2,000 per week.
Work Part Time?
Only 20 hours per week. Then, the weekly amount would be $1000.
How Much is $50 per Hour Bi-Weekly
For this calculation, take the average weekly pay of $2,000 and double it.
$2,000 per week x 2 = $4,000
Also, the other way to calculate this is:
40 hours x 2 weeks x $50 an hour = $4,000
Work Part Time?
Only 20 hours per week. Then, the bi-weekly amount would be $2,000.
How Much is $50 Per Hour Per Day
This depends on how many hours you work in a day. For this example, we are going to use an eight-hour workday.
8 hours x $50 per hour = $400 per day.
If you work 10 hours a day for four days, then you would make $500 per day. (10 hours x $50 per hour)
Work Part Time?
Only 4 hours per day. Then, the daily amount would be $200.
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Or just make more than your current income….
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$50 Per Hour is…
$50 per Hour – Full Time
Total Income
Yearly Salary (52 weeks)
$104,000
Yearly Wage (50 weeks)
$100,000
Monthly Salary (173 hours)
$8,667
Weekly Wage (40 Hours)
$2,000
Bi-Weekly Wage (80 Hours)
$4,000
Daily Wage (8 Hours)
$400
Net Estimated Monthly Income
$6,617
**These are assumptions based on simple scenarios.
Paid Time Off Earning 50 Dollars an Hour
Does your employer offer paid time off?
As an hourly employee, you may or may not get paid time off.
So, here are the scenarios for both cases.
For general purposes, we are going to assume you work 40 hours per week over the course of the year.
Case # 1 – With Paid Time Off
Most hourly employees get two weeks of paid time off which is equivalent to 2 weeks of paid time off.
In this case, you would make $104,000 per year.
This is the same as the example above for an annual salary making $50 per hour.
Case #2 – No Paid Time Off
Unfortunately, not all employers offer paid time off to their hourly employees. While that is unfortunate, it is best to plan for less income.
Life happens. There will be times you need to take time off for numerous reasons – sick time, handling a family emergency, or even vacation.
So, let’s assume you take 2 weeks off without paid time off.
That means you would only work 50 weeks of the year instead of all 52 weeks. Take 40 hours times 50 weeks and that equals 2,000 working hours. Then, multiply the hourly salary of $50 times 2,000 working hours, and the result is $100,000.
40 hours x 50 weeks x $50 = $100,000
You would average $400 per working day and nothing when you don’t work.
$50 an Hour is How Much a year After Taxes
Let’s be honest… Taxes can take up a big chunk of your paycheck. Thus, you need to know how taxes can affect your hourly wage.
Also, every single person’s tax situation is different.
On the basic level, let’s assume a 12% federal tax rate and a 4% state rate. Plus a percentage is taken out for Social Security and Medicare (FICA) of 7.65%.
Gross Annual Salary: $104,000
Federal Taxes of 12%: $12,480
State Taxes of 4%: $4,160
Social Security and Medicare of 7.65%: $7,956
$50 an Hour per Year after Taxes: $79,404
This would be your net annual salary after taxes.
To turn that back into an hourly wage, the assumption is working 2,080 hours.
$79,404 ÷ 2,080 hours = $38.18 per hour
After estimated taxes and FICA, you are netting $38.18 an hour. That is $11.83 an hour less than what you thought you were paid.
This is a very highlighted example and can vary greatly depending on your personal situation. Therefore, here is a great tool to help you figure out how much your net paycheck would be.
Plus budgeting for under $38 an hour wage is much different.
$50 An Hour Salary Calculator
Now, you get to figure out how much you make based on your hours worked or if you make a wage between $50.01-50.99.
This is super helpful if you make $50.15, $50.45, or $55.90.
Plus many of the best paying jobs in real estate investment trusts pay in this range.
You are probably wondering can I live on my own making 50 dollars an hour? How much rent or mortgage payment can you afford on 50 an hour?
Using our Cents Plan Formula, this is the best-case scenario on how to budget your $50 per hour paycheck.
When using these percentages, it is best to use net income because taxes must be paid.
In this example, we calculated $50 an hour was $38.18 after taxes. That would average $6,617 per month.
According to the Cents Plan Formula, here is the high-level view of a $50 per hour budget:
Basic Expenses of 50% = $3308.50
Save Money of 20% = $1323.40
Give Money of 10% = $661.70
Fun Spending of 20% = $1323.40
Debt of 0% = $0
Can You Make These Percentages?
For someone making over $100K gross annually, this is completely doable assuming there is no debt involved. The risk most people find themselves in is lifestyle creep and keeping up with the Joneses.
You can be strategic with your saving and investing to quickly become the millionaire next door. Then, that will allow a level of time freedom you have never experienced.
To further break down an example budget of $50 per hour, then using the ideal household percentages is extremely helpful.
recommended budget percentages based on $50 per hour wage:
Category
Ideal Percentages
Sample Monthly Budget
Giving
10%
$693
Savings
15-25%
$1733
Housing
20-30%
$1820
Utilities
4-7%
$347
Groceries
5-12%
$607
Clothing
1-4%
$65
Transportation
4-10%
$347
Medical
5-12%
$443
Life Insurance
1%
$43
Education
1-4%
$87
Personal
2-7%
$160
Recreation / Entertainment
3-8%
$282
Debts
0% – Goal
$0
Government Tax (including Income Taxes, Social Security & Medicare)
15-25%
$2050
Total Gross Income
$8,667
**This is a sample budget. You can adjust your categories based on your personal situation.
Learn how much house can I afford with 100k salary.
Can I Live off $50 Per Hour?
At this $50 hourly wage, you are making more than $100K per year. So yes, you should thrive on this annual salary.
This is well over the median income of $60,000 salary. That means you should be able to increase your savings percentage each year and live better than 80% of the world.
The question is, are you? Or are you straddled in debt? Struggling and living paycheck to paycheck?
Unfortunately, too many people are still struggling even though they are making nearly 4x the minimum wage.
Should living on $100K be doable? Absolutely.
Don’t be caught in a tough situation. You need to live below your means. If not, you are wasting too much of your hard-earned cash.
Can you truly live off $50 an hour annually?
Just like any wage… you must spend less than your income. Plus consistently save.
If you are constantly struggling to keep up with bills and expenses, then you need to break that constant cycle. It is possible to be smart with money.
Your mindset is everything.
This is what you say to yourself… Okay, I am blessed to make more than the average worker. So, I must live on that paycheck or find ways to start diversifying my income into multiple streams and start investing. Then, I am going to give back to what helped me to get where I am today.
In the next section, we will dig into ways to increase and diversify your income, but for now, is it possible to thrive on $50 an hour?
Yes, you can do it, and as you can see it is possible with the sample budget of $50 per hour.
Living in a higher cost of living area would be more difficult. So, you may have to get a little creative. For example, you might have to have a roommate. Move to a lower cost of living area where rent is cheaper.
Also, you must evaluate your “fun spending” items. Many of those expenses are not mandatory and will break your budget. You can find plenty of free things to do without spending money.
5 Ways to Increase Your Annual Salary
This right here is the most important section of this post.
Even though, you are making good money. You might have reached a maximum ceiling of income in your field. You may need to change companies.
More often than not, you need to find ways to diversify your income. One type of income will get you far in your personal finance journey, but to truly see faster progress you need multiple streams of income.
Finding ways to increase your monthly pay by $500 or $1000 will add up over the year.
1. Find Alternative Ways to Make Money
In today’s society, you need to find ways to make more money. Period.
There is no way to get around it. You need to find additional income outside a traditional nine-to-five position or typical 40 hour a week job. You will reach a point where you are maxed on what you can make in your current position or title. There may be some advancement to move forward, but in many cases, there just is not much room for growth.
So, you need to find a side hustle – another way to make money.
Do something that you enjoy, turn your hobby into a way to make money, turn something that you naturally do, and help others into a service business. In today’s society, the sky is the limit on how you can earn a freelancing income.
Must Read: 20 Genius Ways on How to Make Money Fast
2. Earn Passive Income
This can be from a variety of ways including the stock market, real estate, online courses, book sales, etc. This is where the differentiation between struggling financially and becoming financially stable.
By earning money passively, you are able to do the things that you enjoy doing and not be loaded down, with having a job that you need to work, and a place that you have to go to. And you still make money doing nothing.
Here is an example:
You can start a brokerage account and start trading stocks for $50. You need to learn and take the one and only investing class I recommend. Learn how the market works, watch videos, and practice in a simulator before you start using your own money.
One gentleman started with $5,000 in his trading account and now has well over $36,000 in less than a year. Just from practice and being consistent, he has learned that passive income is the way for him to increase his income and also not be a slave to his job.
Related Reading: How Fast Can you Make Money in Stocks? The Real Answer
3. Become a Freelancer
When you make $50 an hour, you are good at your job. You know what you are doing and people are willing to pay you for it.
Pick up side jobs and spend your free time as a freelancer.
This is one of the best ways to make extra money without a lot of upfront effort or costs.
I know plenty of people who make a living as freelance writers.
The options are endless if you are willing to think outside of the box.
4. Ask for a Raise
The first thing to do is ask for a raise. Walk right in and ask for a raise because you never know what the answer will be until you ask.
If you want the best tips on how specifically to ask for a raise and what the average wage is for somebody doing your job, then check out this book. In this book, the author gives you the exact way to increase your income. The purchase is worth it or go down to the library and check that book out.
If that does not pan out, then look for a new job. Maybe a completely new industry.
It might be a total change for you, but many times, if you want to change your financial situation, then that starts with a career change. Maybe you’re stressed out at work. Making $50 an hour isn’t worth it for you if you’re not able to enjoy life; maybe changing jobs and finding another job may increase your pay, but it will also increase your quality of life.
5. Find a New Career
Because of student loans, too many employees feel like they are stuck in the career field they chose. They feel sucked into the job that they don’t like or have the potential they thought it would.
I was in the same situation for many years until I decided to make a complete career change. I am glad I did. I have the flexibility that I needed in my life to do what I wanted when I needed to do it. Plus I am able to enjoy my entrepreneurial spirit.
Tips to Live on $50 an Hour
In this last section, grasp these tips on how to live on $50 an hour. On our site, you can find lots of money saving tips to help stretch your income further.
Here are the most important tips to live on $50 an hour. More importantly stretch how much you make, in case you are in the “I don’t want to work anymore” mindset. Highlight these!
1. Spend Less Than you Make
First, you must learn to spend less than you make.
If not you will be caught in the debt cycle and that is not where you want to be. You will be consistently living paycheck to paycheck.
In order to break that dreadful cycle, it means your expenses must be less than your income.
And when I say income, it’s not the $50 an hour. As we talked about earlier in the post, there are taxes. The amount of taxes taken out of your paycheck is called your net income which is $50 an hour minus all the taxes, FICA, social security, and Medicare is taken out. That is your net income.
So, your net income has to be less than your net income. Learn the difference between gross pay vs net pay.
2. Living Below Your Means
You need to be happy. And living on less can make you happier. Studies prove that less is better.
Finding contentment in life is one thing that is a struggle for most.
We are driven to want the new shiny toy, the thing next door, the stuff your friend or family member got. Our society has trained you that you need these things as well.
Have you ever taken a step back and looked at what you really need?
Once you can find contentment with life, then you are going to be set for the long term with your finances.
Here is our story on owning less stuff. We have been happier since.
3. Make More Money
If you want if you do not settle for less, then find ways to make more money. If you want more out of life, then increase your income.
You need to be an advocate for yourself.
Find ways to make more money.
It could be a side hustle, a second job, asking for a raise, going to school to change careers, or picking up extra hours.
Whatever path you take, that’s fine. Just find ways to make more money. Period.
4. Make Saving Money Fun
You need to make saving money fun. If you’re good, since you must keep your expenses low, you have to find ways to make your savings fun!
Find new ways of saving money and have fun with it.
Even better, get your family and kids involved in the challenge to save money. Tell them the reason why you are saving money and this is what you are doing.
Here are plenty of things to do with no money. Free activities without costing you a dime. That is a fantastic resource for you and you will never be bored.
And you will learn a lot of things in life you can do for free. Personally, some of the best ones are getting outside and enjoying some fresh air.
5. No State Taxes
Paying taxes is one option to increase what you take home in each paycheck.
These are the states that don’t pay state income taxes on wages:
Alaska
Florida
Nevada
New Hampshire
South Dakota
Tennessee
Texas
Washington
Wyoming
It is very interesting if you take into account the amount of state taxes paid compared to a state with income taxes.
Also, if you live in one of the higher taxed states, then you may want to reconsider moving to a lower cost of living area. The higher taxes income tax states include California, Hawaii, New Jersey, Oregon, Minnesota, the District of Columbia, New York, Vermont, Iowa, and Wisconsin. These states tax income somewhere between 7.65% – 13.3%.
6. Stick to a Budget
You need to learn how to start a budget. We have tons of budgeting resources for you.
While creating a budget is great, you need to learn how to use one.
You do not have to budget down to every last penny.
You need to make sure your expenses are less than your income and that you are creating sinking funds for those irregular expenses.
Budget Help:
7. Pay Off Debt Quickly
The amount that you pay interest on debt is absolutely absurd.
Unfortunately, that is how many of these companies make their money from the interest you pay on debt.
If you are paying 5% to even 20-21% or higher, you need to find ways to lower that debt quickly.
Here’s a debt calculator to help you. Figure out your debt-free date.
Make that paying off debt fast is your target and main focus. I can tell you from personal experience, that it was not until we paid off our debt that we finally rounded the corner financially. Once our debt was paid off, we could finally be able to save money and set money aside in separate bank accounts and pay for cash for things.
It took us working hard to pay off debt. We needed persistence and patience while we had setbacks in our debt-free journey.
Jobs that Pay $50 an Hour
You can find plenty of jobs that pay $50 per hour. Polish up that resume, cover letter, and interview skills.
Job Search Hint: Always send a written follow-up thank you note for your interview. That will help you get noticed and remembered.
First, look at the cities that require a minimum wage in their cities. That is the best place to start to find jobs that are going to pay higher than the federal minimum wage rate. Many of the cities are moving towards this model so, target and look for jobs in those areas.
Possible Ideas:
$50 Per Hour Annual Salary
In this post, we detailed 50 an hour is how much a year. Plus all of the variables that can impact your net income. This is something that you can live off.
$104,000
That is making over $100000 a year.
In this post, we highlighted ways to increase your income as well as tips for living off your wage.
Use the sample budget as a starting point with your expenses.
Now, think back to when you were making $11 an hour… a lot has changed since then, right?
You will have to be savvy and wise with your hard-earned income. But, with a plan, anything is possible!
Still thinking I don’t want to work anymore, you aren’t alone and need to start to plan for your early retirement.
Learn exactly how much do I make per year…
Know someone else that needs this, too? Then, please share!!
Did the post resonate with you?
More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!
Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.
A term deposit, also known as a certificate of deposit (CD) or time deposit, is a low-risk, interest-bearing savings account. In most cases, term deposit holders place their funds into an account with a bank or financial institution and agree not to withdraw the funds until the maturity date (the end of the term). The funds can earn interest calculated based on the amount deposited and the term.
This guide explains what a term deposit is in more detail, including the pros and cons of term accounts.
What Is a Term Deposit or Time Deposit?
Time deposit, term deposit, or certificate of deposit (CD) are all words that refer to a particular kind of deposit account. It’s an amount of money paid into a savings account with a bank or other financial institution. The principal can earn interest over a period that can vary from a month to years. There is usually a minimum amount for the deposit, and the earned interest and principal are paid when the term ends.
One factor to consider is that the account holder usually agrees not to withdraw the funds before the term is over. However, if they do, the bank will likely charge a penalty. Yes, that’s a downside, but consider the overall picture: Term deposits typically offer higher interest rates than other savings accounts where the account holder can withdraw money at any time without penalties.
Compared to stocks and other alternative investments, term deposits are considered low-risk (they’re typically insured by the FDIC or NCUA) for up to $250,000 per account holder, per account ownership category (say, single, joint, or trust), per insured institution. For these reasons, the returns tend to be conservative vs. higher risk ways to grow your funds.
💡 Quick Tip: Tired of paying pointless bank fees? When you open a bank account online you often avoid excess charges.
How Does a Bank Use Term Deposits?
Banks and financial institutions can make money through financing. For example, they likely earn a profit by issuing home, car, and personal loans and charging interest on those financial products. Thus, banks are often in need of capital to fund the loans. Term deposits can provide locked-in capital for lending institutions.
Here’s how many bank accounts work:
• When a customer places funds in a term deposit, it’s similar to a loan to the bank. The bank will hold the funds for a set time and can use them to invest elsewhere to make a return.
• Say the bank gives the initial depositor a return of 2.00% for the use of funds in a term deposit. The bank can then use the money on deposit for a loan to a customer, charging a 6.00% interest rate for a net margin of 4.00%. Term deposits can help keep their financial operation running.
Banks want to maximize their net interest margin (net return) by offering lower interest for term deposits and charging high interest rates for loans. However, borrowers may choose a lender with the lowest interest rate, while CD account holders probably seek the highest rate of return. This dynamic keeps banks competitive.
Recommended: Understanding the Different Types of Bank Accounts
How Interest Rates Affect Term Deposits
Term deposits and saving accounts in general tend to be popular when interest rates are high. That’s because account holders can earn a high return just by stashing their money with a financial institution. When market interest rates are low, though, people are more inclined to borrow money and spend on items like homes and cars. They may know they’ll pay less interest on loans, keeping their monthly costs in check. This can stimulate the economy.
When interest rates are low (as checking account interest rates typically are), the demand for term deposits usually decreases because there are alternative investments that pay a higher return. For example, stocks, real estate, or precious metals might seem more appealing, although these are also higher risk.
The interest rate paid on a term deposit usually depends on the amount deposited and the time until maturity. A larger deposit may earn higher interest, and a deposit for a longer period of time (says, a few years vs. a few months) may also reap higher rewards.
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Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!
Types of Term Deposits
There are two main types of term deposits: fixed deposits and recurring deposits. Here’s a closer look.
Fixed Deposits
Fixed deposits are a one-time deposit into a savings account. The funds cannot be accessed until the maturity date, and interest is paid only on maturity.
Recurring Deposits
With a recurring deposit, the account holder deposits a set amount in regular intervals until the maturity date. For example, the account holder might deposit $100 monthly for five months. Each deposit will earn less interest than the previous installment because the bank holds it for a shorter period.
In addition to these two types, you may see banks promoting different kinds of CDs, whether they vary by term length or by features (such as a penalty-free CD, meaning you aren’t charged if you withdraw funds early).
Opening a Term Deposit
To open a term deposit account, search online for the best interest rates, keeping in mind how much you want to deposit, how often, and for how long. Most banks will ask you to fill in an online application. Make sure you read and agree to the terms of the agreement. For example, check the penalties that apply if you decide to withdraw your funds early as well as the minimum amount required to earn a certain interest rate.
Closing a Term Deposit
A term deposit may close for two reasons — either the account reaches maturity or the account holder decides to end the term early. Each bank or financial institution will have different policies regarding the penalties imposed for breaking a term deposit. Read the fine print or ask a bank representative for full details.
When time deposit accounts mature, some banks automatically renew them (you may hear this worded as “rolled over” into a new account) at the current interest rate. It would be your choice to let that move ahead or indicate to the bank that you prefer to withdraw your money.
If you want to close a term deposit before the maturity date, contact your bank, and find out what you need to do and the penalties. The penalty will depend on the amount saved, the interest rate, and the term. The fee may involve the loss of some or all of interest earned. In very rare cases, your CD could lose value in this way.
Term Deposits and Inflation
Term deposits may not keep up with inflation. That is, if you lock into an account and interest rates rise over time, your money won’t earn more. You will likely still earn the same amount promised when you funded the account. Also, once tax is deducted from the interest income, returns on a fixed deposit may fall below the rate of inflation. So, while term deposits are safe investments, the interest earned can wind up being negligible. You might investigate whether high-yield accounts or stocks, for instance, are a better option.
Term Deposit Pros
What are the advantages of a term deposit versus regular high-yield savings account and other investments? Here are some important benefits:
• Term deposit accounts are low-risk.
• CDs or time deposits usually pay a fixed rate of return higher than regular savings accounts.
• The funds in a CD or deposit account are typically FDIC-insured.
• Opening several accounts with different maturity dates can allow the account holder to withdraw funds at intervals over time, accessing money without paying any penalties. This system is called laddering.
• Minimum deposit amounts are often low.
Term Deposit Cons
There are a few important disadvantages of term deposit accounts to note, including:
• Term deposits can offer lower returns than other, riskier investments.
• Term deposits and CDs usually have fixed interest rates that do not keep up with inflation.
• Account holders likely do not have access to funds for the length of the term.
• Account holders will usually pay a penalty to access funds before the maturity date.
• A term deposit could be locked in at a low interest rate at a time when interest rates are rising.
Examples of Bank Term Deposits
Here’s an example of how time deposits can shape up. Currently, Bank of America offers a Featured CD account: A 13-month Featured CD with a deposit of more than $1,000 but less than $10,000 pays 4.75% APY.
At Chase, a 9-month CD with a deposit of more than $1,000 but less than $10,000 pays 4.25% APY. If you have $100,000 or more to deposit, the APY rises to 4.75%.
Recommended: How Do You Calculate Interest on a Savings Account?
The Takeaway
Term deposits, time deposits, or CDs are conservative ways to save. Account holders place a minimum amount of money into a bank account for a set term at a fixed interest rate. The principal and interest earned can be withdrawn at maturity or rolled over into another account. If funds are withdrawn early, however, a penalty will likely be assessed.
While these accounts typically have a low interest rate, they may earn more than standard bank accounts. What’s more, their low-risk status can help some people reach their financial goals.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.
FAQ
Can you lose money in a term deposit?
Most term deposits or CDs are FDIC-insured, which means your money is safe should the bank fail. However, if you withdraw funds early, you may have to pay a penalty. In a worst-case scenario, this could mean that you receive less money than you originally invested.
Are term deposits and fixed deposits the same?
There is usually no difference between a term deposit and a fixed deposit. They both describe low-risk, interest-bearing savings accounts with maturity dates.
Do you pay tax on term deposits?
With the exception of CDs put in an IRA, any earnings on term deposits or CDs are usually subject to federal and state income taxes. The percentage depends on your overall income and tax bracket. If penalties are paid due to early withdrawal of funds, these can probably be deducted from taxes if the CD or term deposit was purchased through a tax-advantaged individual retirement account (IRA) or 401(k).
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Editor’s Note: Parts of this story were auto-populated using data from Curinos, a mortgage research firm that collects data from more than 250 lenders. For more details on how we compile daily mortgage data, check out our methodology here.
Mortgage rates continue their modest decline this week, although 30-year fixed rates continue to hover well above 7%. According to data from Curinos analyzed by MarketWatch Guides, today’s 30-year fixed rate is down to 7.22% APR.
On Friday, a stronger-than-expected jobs report led Lawrence Yun, chief economist for the National Association of Realtors, to predict rates will continue to remain above 7% for the next month.
While high rates continue to affect the housing market, there’s a silver lining for younger and first-time homebuyers. Real estate marketplace Realtor.com released data Tuesday indicating there are more smaller and lower-priced homes on the market than this time last year, based on price-per-square-foot data. Since last May, there has been a 46.6% increase in the amount of homes in the $200,000 to $350,000 price range across the U.S.
Here are today’s average mortgage rates:
30-year fixed mortgage rate: 7.22%
15-year fixed mortgage rate: 6.47%
5/6 ARM mortgage rate: 7.09%
Jumbo mortgage rate: 7.15%
Current Mortgage Rates
Product
Rate
Last Week
Change
30-Year Fixed Rate
7.22%
7.40%
-0.18
15-Year Fixed Rate
6.47%
6.71%
-0.24
5/6 ARM
7.09%
7.07%
+0.02
7/6 ARM
7.20%
7.24%
-0.04
10/6 ARM
7.27%
7.30%
-0.03
30-Year Fixed Rate Jumbo
7.15%
7.25%
-0.10
30-Year Fixed Rate FHA
6.89%
7.02%
-0.13
30-Year Fixed Rate VA
6.91%
7.04%
-0.13
Disclaimer: The rates above are based on data from Curinos, LLC. All rate data is accurate as of Friday, June 14, 2024. Actual rates may vary.
>> View historical mortgage rate trends
Mortgage Rates for Home Purchase
30-year fixed-rate mortgages are down, -0.18
The average 30-year fixed-mortgage rate is 7.22%. Since the same time last week, the rate is down, changing -0.18 percentage points.
At the current average rate, you’ll pay $680.14 per month in principal and interest for every $100,000 you borrow. You’re paying less compared to last week when the average rate was 7.40%.
15-year fixed-rate mortgages are down, -0.24
The average rate you’ll pay for a 15-year fixed-mortgage is 6.47%, a decrease of-0.24 percentage points compared to last week.
Monthly payments on a 15-year fixed-mortgage at a rate of 6.47% will cost approximately $869.46 per $100,000 borrowed. With the rate of 6.71% last week, you would’ve paid $882.69 per month.
5/6 adjustable-rate mortgages are up, +0.02
The average rate on a 5/6 adjustable rate mortgage is 7.09%, an increase of+0.02 percentage points over the last seven days.
Adjustable-rate mortgages, commonly referred to as ARMs, are mortgages with a fixed interest rate for a set period of time followed by a rate that adjusts on a regular basis. With a 5/6 ARM, the rate is fixed for the first 5 years and then adjusts every six months over the next 25 years.
Monthly payments on a 5/6 ARM at a rate of 7.09% will cost approximately $671.36 per $100,000 borrowed over the first 5 years of the loan.
Jumbo loan interest rates are down, -0.10
The average jumbo mortgage rate today is 7.15%, a decrease of-0.10 percentage points over the past week.
Jumbo loans are mortgages that exceed loan limits set by the Federal Housing Finance Agency (FHFA) and funding criteria of Freddie Mac and Fannie Mae. This generally means that the amount of money borrowed is higher than $726,200.
Product
Monthly P&I per $100,000
Last Week
Change
30-Year Fixed Rate
$680.14
$692.38
-$12.24
15-Year Fixed Rate
$869.46
$882.69
-$13.23
5/6 ARM
$671.36
$670.01
+$1.35
7/6 ARM
$678.79
$681.50
-$2.71
10/6 ARM
$683.53
$685.57
-$2.04
30-Year Fixed Rate Jumbo
$675.41
$682.18
-$6.77
30-Year Fixed Rate FHA
$657.93
$666.65
-$8.72
30-Year Fixed Rate VA
$659.27
$667.99
-$8.72
Note: Monthly payments on adjustable-rate mortgages are shown for the first five, seven and 10 years of the loan, respectively.
Factors That Affect Your Mortgage Rate
Mortgage rates change frequently based on the economic environment. Inflation, the federal funds rate, housing market conditions and other factors all play into how rates move from week-to-week and month-to-month.
But outside of macroeconomic trends, several other factors specific to the borrower will affect the mortgage interest rate. They include:
Financial situation: Mortgage lenders use past financial decisions of borrowers as a way to evaluate the risk of loaning money.
Loan amount and structure: The amount of money that bank or mortgage lender loans and its structure (including both the term and whether its a fixed-rate or adjustable-rate).
Location: Mortgage rates vary by where you are buying a home. Areas with more lenders, and thus more competition, may have lower rates. Foreclosure laws can also impact a lender’s risk, affecting rates.
Whether borrowers are first-time homebuyers: Oftentimes first-time homebuyer programs will offer new homeowners lower rates.
Lenders: Banks, credit unions and online lenders all may offer slightly different rates depending on their internal determination.
How To Shop for the Best Mortgage Rate
Comparison shopping for a mortgage can be overwhelming, but it’s shown to be worth the effort. Homeowners may be able to save between $600 and $1,200 annually by shopping around for the best rate, researchers found in a recent study by Freddie Mac. That’s why we put together steps on how to shop for the best mortgage rate.
1. Check credit scores and credit reports
A borrower’s credit situation will likely determine the type of mortgage they can pursue, as well as their rate. Conventional loans are typically only offered to borrowers with a credit score of 620 or higher, while FHA loans may be the best option for borrowers with a FICO score between 500 and 619. Additionally, individuals with higher credit scores are more likely to be offered a lower mortgage interest rate.
Mortgage lenders often review scores from the three major credit bureaus: Equifax, Experian and TransUnion. By viewing your scores ahead of lenders considering you for a loan, you can check for errors and even work to improve your score by paying down balances and limiting new credit cards and loans.
2. Know the options
There are four standard mortgage programs: conventional, FHA, VA and USDA. To get the best mortgage rate and increase your odds of approval, it’s important for potential borrowers to do their research and apply for the mortgage program that best fits their financial situation.
The table below describes each program, highlighting minimum credit score and down payment requirements.
Though conventional mortgages are most common, borrowers will also need to consider their repayment plan and term. Rates can be either fixed or adjustable and terms can range from 10 to 30 years, though most homeowners opt for a 15- or 30-year mortgage.
3. Compare quotes across multiple lenders
Shopping around for a mortgage goes beyond comparing rates online. We recommend reaching out to lenders directly to see the “real” rate as figures listed online may not be representative of a borrower’s particular situation. While most experts recommend getting quotes from three to five lenders, there is no limit on the number of mortgage companies you can apply with. In many cases, lenders will allow borrowers to prequalify for a mortgage and receive a tentative loan offer with no impact to their credit score.
After gathering your loan documents – including proof of income, assets and credit – borrowers may also apply for pre-approval. Pre-approval will let them know where they stand with lenders and may also improve negotiating power with home sellers.
4. Review loan estimates
To fully understand which lender is offering the cheapest loan overall, take a look at the loan estimate provided by each lender. A loan estimate will list not only the mortgage rate, but also a borrower’s annual percentage rate (APR), which includes the interest rate and other lender fees such as closing costs and discount points.
By comparing loan estimates across lenders, borrowers can see the full breakdown of their possible costs. One lender may offer lower interest rates, but higher fees and vice versa. Looking at the loan’s APR can give you a good apples-to-apples comparison between lenders that takes into account both rates and fees.
5. Consider negotiating with lenders on rates
Mortgage lenders want to do business. This means that borrowers may use competing offers as leverage to adjust fees and interest rates. Many lenders may not lower their offered rate by much, but even a few basis points may save borrowers more than they might think in the long run. For instance, the difference between 6.8% and 7.0% on a 30-year, fixed-rate $100,000 mortgage is roughly $5,000 over the life of the loan.
Expert Forecasts for Mortgage Rates
Mortgage rates have cooled significantly over the past several months. After the 30-year fixed-rate mortgage hit 8% last October, it ended 2023 closer to 7%. In fact, the average for Q4 2023 was 7.3%.
Analysts with Fannie Mae and the Mortgage Bankers Association (MBA) both project that rates will fall going into 2024 and throughout next year.
Fannie Mae economists expect rates to drop more quickly, falling below 6% by Q4 2024. Meanwhile, the MBA’s forecast for Q4 2024 is 6.1% and 5.9% for Q1 2025.
More Mortgage Resources
Methodology
Every weekday, MarketWatch Guides provides readers with the latest rates on 11 different types of mortgages. Data for these daily averages comes from Curinos, LLC, a leading provider of mortgage research that collects data from more than 250 lenders. For more details on how we compile daily mortgage data, check out our comprehensive methodology here. Editor’s Note: Before making significant financial decisions, consider reviewing your options with someone you trust, such as a financial adviser, credit counselor or financial professional, since every person’s situation and needs are different.
These summery home decor finds are so chic — and available at Walmart
Sometimes you just want to give your home a little bit of a makeover. The problem with that is keeping up with the latest trends in home decor — and regularly swapping out your furniture and decor pieces for the newest styles — can get very expensive, very quickly. Luckily, you can get tons of chic pieces at surprisingly affordable prices from Walmart.
Right now, Walmart has trendy furniture and decor that’s perfect for anyone looking to give their home a summer refresh. These pieces are light, bright and perfectly on trend — and you won’t be able to resist grabbing some of them for your home once you see these low prices. From side tables with trendy cane accents to Moroccan-inspired area rugs, arched full-length mirrors perfect for checking out your summer outfits and more, you can get everything you need for a mini home makeover fit for the season — and all without breaking the bank.
In this article: Better Homes & Gardens Springwood Caning Side Table, Light Honey Finish, Seven Six Home 5’x7′ Area Rugs for Living Room Washable Rugs Boho Moroccan Area Rug and BEAUTYPEAK Arched Full-Length Floor Mirror 64″x21.1″ Full-Body Standing Mirror
Scroll down below to check out 10 of our favorite summer finds from Walmart. These are so trendy and chic, people won’t believe where you got them — but you’ll love the savings.
If your home needs a refresh, you’ll want to check out these chic, affordable home decor pieces from Walmart
Better Homes & Gardens Springwood Caning Side Table, Light Honey Finish
This light and bright side table features two shelves for storage and trendy cane accents.
Seven Six Home 5’x7′ Area Rugs for Living Room Washable Rugs Boho Moroccan Area Rug
This Moroccan-inspired area rug has a neutral-colored geometric pattern that adds texture to your space but goes with any color palette.
This coffee table provides a storage shelf for conveniently tucking away items you don’t use every day behind trendy cane webbing, so they’re partially out of sight.
Crystal Art Gallery Midcentury Modern Geometric Potted Plants, Neutrals
Add some art to your walls with this neutral print of two potted plants inspired by midcentury designs.
Better Homes & Gardens Beige Cactus 20″ x 20″ Pillow by Dave & Jenny Marrs
This linen throw pillow is embroidered with a geometric print to add texture and visual interest to any space.
Prices listed reflect time and date of publication and are subject to change.
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