mortgage lender

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If you’re an existing homeowner looking for a lower rate on your mortgage, Sovereign Lending Group thinks it might be able to help.

Their mantra is “Stop overpaying for your mortgage,” a common issue that affects millions of Americans.

In fact, mortgage analytics company Black Knight said there were 15.1 million high quality refinance candidates in the market as of the end of July.

And these homeowners could save a collective $4.5 billion per month if they did something about it.

What makes Sovereign Lending Group unique is that nearly every loan the company originates is a refinance. So they must have the process down pat.

Let’s learn more about them to see if they could help you save money too.

Sovereign Lending Group Fast Facts

  • Direct-to-consumer mortgage lender
  • Founded in 2005, headquartered in Costa Mesa, CA
  • Funded more than $2 billion in home loans during 2020
  • Nearly all of their production consists of refinance loans (but they also offer purchase financing)
  • Currently licensed to do business in 45 states and D.C.
  • Most active in home state of California which generated 35% of overall loan volume

Sovereign Lending Group is a direct-to-consumer retail mortgage lender based in Costa Mesa, California.

They operate a centralized call center that connects their customers with loan officers and processors.

While they offer home purchase financing, they appear to be mostly a mortgage refinance shop, with such loans accounting for nearly 100% of volume recently.

The company got its start back in 2005, right before the housing market went kaput. But they’re still here today and funding billions annually.

Last year, they originated more than $2 billion in home loans, with about half of them VA loans and the other half conventional. They also did a small amount of FHA loans as well.

Sovereign Lending Group is currently licensed to do business in 45 states and the District of Columbia, but most active in their home state of California.

They don’t appear to be available in Kansas, Missouri, New York, Ohio, or Wyoming.

How to Apply with Sovereign Lending Group

To get started, you can visit their website and click on “Apply Now,” or simply call them up on the phone.

If you go the online route, you’ll need to fill out a short lead form that includes your personal information and property details.

Once completed, a loan officer will get in touch with you to discuss loan pricing and eligibility.

Assuming you like what you hear, you’ll be able to formally apply for a mortgage online once a link is provided.

While details of their digital process are scant, they do appear to have a borrower portal where you can upload documents and eSign disclosures.

Additionally, you can check the status of your loan or view messages from your originator via the portal.

All in all, it appears they offer some digital capabilities, but perhaps less than the more tech-enabled lenders like Better Mortgage or Rocket Mortgage.

Loan Programs Offered by Sovereign Lending Group

  • Home purchase loans
  • Refinance loans: rate and term, cash out, streamline
  • Conventional loans backed by Fannie Mae and Freddie Mac
  • FHA loans
  • VA loans
  • Second mortgages: home equity loans
  • Fixed-rate mortgages
  • Adjustable-rate mortgages

Sovereign Lending Group appears to be a no-frills lender, focusing mostly on originating low-cost mortgage refinances.

However, they do have the most common home loan types available that should suit the majority of homeowners.

This includes home purchase loans, along with all types of refinances, including cash out refinances.

You can get a conventional loan backed by Fannie Mae or Freddie Mac, an FHA loan, or a VA loan.

They appear to focus mostly on conventional and VA loans, with the latter being their most offered product. So if you’re a veteran, Sovereign Lending Group might be a good fit.

The only big loan types they seem to be missing are jumbo loans and USDA loans.

But they offer both fixed-rate and adjustable-rate mortgages in a variety of different loan terms. And apparently second mortgages too.

Sovereign Lending Group Mortgage Rates

While Sovereign Lending Group doesn’t post their mortgage rates online, you can sign up for their “Rate Watch” and get notified if and when mortgage rates drop.

In order to get today’s pricing, you’ll need to get in touch with a licensed loan officer first.

You can do this by filling out the lead form on their website or by calling them directly.

They say they “will beat virtually any mortgage rate quote,” so if you find something better, SLG might be able to do better.

Their main goal is to offer the best refinance rates and lowest closing costs possible, so to that end they appear to be a discount mortgage lender.

Of course, you’ll still need to shop around to verify that they’re low priced. And be sure to inquire about any lender fees charged.

My guess is that they specialize in the no cost refinance, in which no closing costs are paid by the borrower directly.

While it’d be nice to see their mortgage rates online, I would assume they’re competitive because they operate as a direct lender without branches.

This low-cost structure may allow them to be more competitive than the brick-and-mortar banks and lenders out there.

Sovereign Lending Group Reviews

At Experience.com, Sovereign Lending Group has an excellent 4.71-star rating out of 5 from nearly 1,400 customer reviews.

On that site, you can also see which loan officer the customer worked with, and fine-tune your search.

From there, you might be able to request that specific individual to work with if their reviews are much better than their colleagues.

Over at LendingTree, they score a 4.8 out of a possible 5 from over 1,500 reviews, with a 97% recommended rate.

In other words, only three out of 100 past customers wouldn’t recommend them to others.

On Google, they’ve got a similarly strong 4.4-star rating from about 700 reviews.

Lastly, Sovereign Lending Group is not Better Business Bureau (BBB) accredited and currently has a ‘B’ rating based on customer complaint history.

To sum things up, they are very much a refinance shop so they’re probably best suited for existing homeowners.

If you’re looking for a lower interest rate on your existing mortgage, or want to pull cash out, they could be a good choice due to price and speed.

Those purchasing a home or with more complicated loan scenarios may want to look elsewhere.

Sovereign Lending Group Pros and Cons

The Pros

  • Specialize in mortgage refinances
  • Say they can beat virtually any mortgage rate quote
  • Offer a streamlined loan approval process
  • Online borrower portal to manage your loan and track status
  • Good selection of loan programs to choose from
  • Excellent customer reviews across multiple rating sites

The Cons

  • No physical locations
  • ‘B’ rating with the Better Business Bureau
  • May transfer your loan after closing

Source: thetruthaboutmortgage.com

Apache is functioning normally

I wrote a while back that more than half of consumers switched mortgage companies when obtaining a subsequent home loan.

The message was pretty clear – there’s not much loyalty in the mortgage business.

Ultimately, it’s hard to be loyal if there’s a better deal to be had elsewhere, or if someone else is offering to treat you better.

In an effort to combat that, and improve customer retention in the homes loans business, lenders are beginning to take things a lot more seriously.

Homebot Engages Past Customers with Real Data

For example, last year Guild Mortgage partnered with Homebot to deliver regular, customized home financing digests to its existing customers.

Their automated marketing platform allows loan officers to present past customers with relevant data, economic insights, and other market intelligence.

Most importantly, it helps them stay connected with homeowners long after the mortgage has funded.

As part of that agreement, Guild Mortgage’s 1,100+ loan officers have access to Homebot’s “Lender Base” software to serve its ongoing customer retention initiative.

Many other mortgage lenders have also partnered up, including Planet Home Lending, Citywide Home Loans, and Cherry Creek Mortgage.

HouseCanary’s ComeHome Wants Your Customers to Come Back

In late 2019, HouseCanary launched ComeHome, a proprietary platform used to attract, retain and even convert customers.

It creates an ongoing relationship with the homeowner that focuses on what’s probably their largest asset.

The ComeHome solution allows lenders to inform homeowners of “opportunities,” such as the ability to refinance, or tap home equity via a line of credit (HELOC).

Most importantly, it makes it easier for mortgage lenders and their originators to engage their customers more frequently using technology as opposed to cold calls and direct mail.

And it’s not just ballpark estimates or generic copy, but rather real data backed by HouseCanary’s automated valuation model.

For example, customers can be informed that certain home improvements may increase their home value by X, using cash from known available equity in the property.

Customers also get a direct path to the loan officer when they’re ready to take action, another important consideration.

Ultimately, the software is in place to ensure you are the homeowner’s first choice for refinancing a mortgage, taking out a home equity loan, or even financing a next home purchase.

Because sometimes simply being first is good enough. The path of least resistance is usually the path taken.

Clearly that’s better than sending your client a notepad with your name on it, or a postcard in the mail with a joke on it.

Quicken Loans’ Cyclops Sees You

Then we have “Cyclops,” a mortgage servicing customer relationship management (CRM) software built by none other than Quicken Loans, the nation’s largest retail home loan lender.

The company developed the Cyclops software in 2016 at its Detroit headquarters, and recently sold the source code to Black Knight.

Like the aforementioned solutions, it provides “highly personalized information about loans, homes and neighborhoods” to existing customers.

For example, a loan originator can use the property’s current value to present refinance and home equity opportunities to borrowers.

It provides an omni-channel customer experience where the borrower can interact with the lender or loan servicer however and whenever they please, which may also increase customer retention.

But Still…Shop Around and Be Prudent

While all this new technology sounds awesome, and is awesome compared to a flyer that winds up in your recycle bin, a few words of caution.

First, don’t take these cool data visualizations as an invitation to refinance your mortgage every six months.

While there’s a good chance you’ve got some equity in your home, it doesn’t necessarily need to be tapped. There are other ways to pay for home renovations.

It may also not be in your best interest to fiddle with your mortgage, even if presented with a really compelling case using artificial intelligence.

Additionally, just because a lender contacts you first doesn’t mean you should use them, or feel any obligation to do so.

While they might have put the idea in your head, still do your due diligence and take the time to shop around with other lenders to see what they have to offer.

It’s pretty shocking that just 2% of consumers choose a mortgage lender for the best interest rate. And that’s exactly why these keeping-in-touch products will work.

Source: thetruthaboutmortgage.com

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Purchase mortgage rates climbed 55 basis points, reflecting surging inflation and the Federal Reserve‘s (The Fed) tightening monetary policy.

According to the latest Freddie Mac PMMS, purchase mortgage rates this week averaged 5.78%, compared to 5.23% the week prior. A year ago at this time, 30-year fixed rate purchase rates were at 2.93%.

“Mortgage rates surged as the 30-year fixed-rate mortgage moved up more than half a percentage point, marking the largest one-week increase in our survey since 1987,” said Sam Khater, Freddie Mac’s chief economist, according to a statement.

The government-sponsored enterprise index accounts solely for purchase mortgages reported by lenders during the past three days. Another index showed rates greater than 6% this week.

Black Knight’s Optimal Blue OBMMI pricing engine, which includes some refinancing data — but excludes cash-out refis to avoid skewing averages – measured the 30-year conforming mortgage rate at 6.03% Wednesday, up from 5.5% the previous week. 

The 30-year fixed-rate jumbo was at 5.46% Wednesday, up from 4.99% the week prior, according to the Black Knight index. 

Creating a path to success in today’s purchase market

Meeting the needs of a new generation of homebuyers while managing the ebbs and flows of a volatile housing market is a major endeavor for any mortgage lender. So, what should lenders be doing to thrive in the face of a post-pandemic housing market rife with new hurdles?

Presented by: Calyx

Higher rates usually reduce borrowers’ demand for mortgage loans. But, this week, mortgage application volume rose 6.6% from the past week as potential borrowers wanted to guarantee a lower rate: Refi applications increased 4% and purchase apps ticked up 8%, according to the Mortgage Bankers Association.

Overall, mortgage rates are following the Fed’s inflation-fighting monetary policy. Wednesday, the Fed raised the federal funds rate by 75 basis points, to 1.50-1.75%, a hike not seen since 1994. Friday, the inflation price index showed 8.6% increase in May.

And more rates hikes are expected to come out of the Fed meeting in July. During a news conference following the Fed’s committee meeting, Chairman Jerome Powell said: “Either a 50 bps or a 75 bps increase seems most likely at our next meeting.”

However, Powell said the central bank will react to incoming data.

“Any guidance that we give is always going to be subject to things working out about as we expect,” he said. “I like to think though that our guidance is still credible, but it’s always going to be conditional on what happens.”

The Fed’s actions are intended to restore greater balance to supply and demand in the housing market, which now faces inventory problems and rising housing prices.

“Higher mortgage rates will lead to moderation from the blistering pace of housing activity that we have experienced coming out of the pandemic, ultimately resulting in a more balanced housing market,” Khater said.  

According to Freddie Mac, the 15-year fixed-rate purchase mortgage averaged 4.81% with an average of 0.9 point, up from last week’s 4.38%. The 15-year fixed-rate mortgage averaged 2.24% a year ago.

The 5-year ARM averaged 4.33%, with buyers on average paying for 0.3 point, up from 4.12% the week prior. The product averaged 2.52% a year ago. 

Source: housingwire.com

Apache is functioning normally

One of the newest mortgage lenders out there goes by the name “Wesley Mortgage,” an ode to the founder of the Methodist Church, John Wesley.

Despite being basically brand new, they are already the “Official Mortgage Provider of the Tennessee Titans” football team.

They also claim to be one of America’s top 500 fastest growing companies, which aligns with their mission to speed up the home loan process using the latest technology.

The company also happens to be located across town from Churchill Mortgage, which is Dave Ramsey’s preferred mortgage lender.

Let’s discover more about this newcomer to see if they can shake things up in the mortgage industry.

Wesley Mortgage Fast Facts

  • A direct-to-consumer mortgage lender
  • Offers home purchase loans and mortgage refinances
  • Founded in 2021, headquartered in Franklin, Tennessee
  • Currently licensed in four states: AL, KY, SC, and TN
  • Official mortgage provider of the Tennessee Titans

Wesley Mortgage is a new direct-to-consumer mortgage lender based out of Franklin, Tennessee that will operate under the “Wesley” umbrella.

Nashville-based entrepreneur Chuck McDowell also runs several other businesses under the name, including Wesley Financial Group and Wesley Insurance, LLC.

Interestingly, his main business is timeshare exits, and they’ve apparently eliminated more than $250 million in so-called timeshare mortgage debt.

If they can do that, there’s a good chance they can get you a mortgage too, as I’d say the former is probably one of the trickier things to wrangle out of.

Anyway, despite launching back in September, they’re already growing fast and headed by mortgage veteran Ed Wallace.

They’re currently licensed in four states, including Alabama, Kentucky, South Carolina, and Tennessee.

However, they have plans to be in all 50 states within 18 to 24 months, with licenses already submitted in Florida, Georgia, North Carolina, Texas, and Virginia.

How to Apply with Wesley Mortgage

To get started, you can either call them up or visit their website. If you go online, there’s what amounts to a lead form that you can fill out.

Once submitted, a loan officer will contact you to discuss your goals, eligibility, and loan pricing.

If you like what you hear, you can apply for a mortgage online using some of the newest technology available.

Their digital mortgage application is powered by Wipro Gallagher. It allows borrowers to complete the form with minimal data entry and auto-populate things like credit, asset, and income information.

You can upload documents, e-Sign disclosures, compare products and rates, and monitor the progress of your loan as it makes its way through underwriting.

Additionally, Wesley Mortgage customers get a single point-of-contact to walk them through every step of the loan process.

This differs from other lenders that hand off the borrower to a processor, an underwriter, a closer, and so on.

In a recent press release, Wallace referred to this as “white glove” treatment. Aside from allowing for better communication, it could simplify things for the borrower and speed up the process.

Along with that, Wesley Mortgage has pushed underwriting to the front of the process to generate approvals quicker and hit turn times faster than traditional lenders.

All of this should make the home loan process a little less painful, and perhaps cheaper as well if they can leverage the latest tech.

Loan Programs Offered by Wesley Mortgage

  • Home purchase loans
  • Mortgage refinances: rate and term and cash out
  • Conforming loans backed by Fannie Mae and Freddie Mac
  • Jumbo loans
  • Non-QM loans

Wesley Mortgage offers both home purchase loans and refinance loans, including cash out refinances if you wish to tap your home equity.

They say you can get up to $1 million in home equity, which certainly puts them in the jumbo loan realm.

Borrowers with cheaper properties and/or smaller loan amounts can also take out a conforming mortgage backed by Fannie Mae or Freddie Mac.

The company also expects to gain FHA and VA approval soon (if it hasn’t already), meaning you’ll be able to obtain an FHA loan or VA loan.

And those who have situations outside the norm might be able to take advantage of a non-QM loan, which are typically reserved for those with unique loan scenarios.

The only major loan type they appear to be missing at the moment is the USDA loan, geared toward those in rural areas of the country.

My assumption is both fixed-rate and adjustable-rate mortgages are available in a variety of different loan terms.

Wesley Mortgage Rates

At the moment, Wesley Mortgage does not openly publicize its mortgage rates online. In order to get today’s pricing, you’ll need to get in contact with a licensed loan officer.

The same goes for lender fees – they don’t mention them on their website, so be sure to ask about any application fee, loan origination fee, and so on.

While convenience and technology are great, so is a low-priced mortgage that you can keep for the next 30 years.

Hopefully they’ll provide more pricing information online in the near future as they continue to expand nationally.

Wesley Mortgage Reviews

Because they’re basically a few months old, their customer reviews are few and far between.

However, they’ve got a 4.94/5-star rating on Zillow from about 20 reviews, many of which say the interest rate obtained was lower than expected.

It’s obviously not a lot to go on, but at least it’s a good start. I will update this page when more reviews come in.

While they aren’t yet on the Better Business Bureau (BBB) website, their sister company Wesley Financial has a solid 4.85/5 customer rating from about 800 reviews.

And the company has an ‘A+’ rating based on complaint history. So hopefully the mortgage venture follows suit.

To sum things up, Wesley Mortgage appears to be an ambitious young mortgage lender with its sights set on becoming a household name, especially in Tennessee.

Their focus on customer service coupled with the latest technology could make them a good choice, whether you’re buying your first home or refinancing an existing mortgage.

The only question mark is their pricing, and it will take time to see how they deliver on their promise to fix the complex mortgage process.

See other top Tennessee mortgage lenders to consider in your home loan search.

Wesley Mortgage Pros and Cons

The Pros

  • Offer a digital mortgage application that is mostly paperless
  • Can apply for a home loan online using the latest technology
  • Home buyers can get pre-qualified in just 15 minutes
  • Customers get one point of contact for the entire loan process
  • Offer a good variety of loan programs including jumbos and non-QM options
  • Parent company is well-liked and has lots of excellent reviews

The Cons

  • Only licensed in four states currently
  • No physical branch locations
  • Do not publicize mortgage rates or lender fees
  • May not service your loan after closing

(photo: Mike Burton)

Source: thetruthaboutmortgage.com

Apache is functioning normally

Perhaps one of the most confusing aspects of getting a mortgage is knowing who you actually pay once the thing funds. And to that end, when your first mortgage payment is due.

While Bank X may have closed your loan, an entirely different company could send you paperwork and a payment booklet. What gives?

Well, this highlights the difference between a mortgage lender and a mortgage servicer.

Mortgage Lender vs. Mortgage Servicer

  • The bank or mortgage lender processes and funds the home loan
  • Once it closes it may be sold off to a loan servicer or retained in portfolio
  • The job of a loan servicer is to collect monthly mortgage payments
  • And manage escrow accounts if your home loan has impounds

As noted, a mortgage loan servicer, also known simply as a loan servicer, is the company that collects your monthly mortgage payments.

They also manage your escrow account if your home loan has impounds, collecting a portion of property taxes and homeowners insurance each month, before making those payments on your behalf when due.

So really, there’s a good chance you’ll deal with your loan servicer a lot more than your mortgage lender, who may have only been in the picture for a month or so while your loan was originated.

You see, many mortgage lenders focus on loan origination as opposed to servicing, so they’re happy to fund your loan and quickly sell it off for a profit, then rinse and repeat.

The same goes for mortgage brokers, who fund your loan on behalf of a wholesale mortgage lender, which also may sell off the loan to a different servicing company shortly after it closes.

Further complicating all this is the fact that your mortgage lender could also be your loan servicer because some big banks and mortgage companies can profit from it.

One thing mortgage companies figured out in recent years was that keeping in touch with their past customers was a great way to generate repeat business.

But if they sell all their home loans off to other companies, they may lose out if mortgage rates fall and these customers are ripe for a mortgage refinance.

There are also mortgage subservicers, companies that perform loan servicing tasks on behalf of a lender, instead of completing those things in-house.

Anyway, without getting too convoluted here, it’s important to note this distinction between lender and servicer so you know who you’re dealing with.

And to ensure you’re sending monthly mortgage payments to the right place!

What Do Loan Servicers Do?

  • Collect monthly mortgage payments
  • Manage escrow accounts (property taxes and homeowners insurance)
  • Provide customer service if borrowers have any questions
  • Generate loan payoff statements
  • Perform loss mitigation (loan default, loan modifications, foreclosure, credit reporting)
  • Ensure compliance with federal, state, local regulations

The list above should give you a better idea of what loan servicers do, and why banks and lenders may choose to outsource these things.

If you have any questions regarding your home loan post-closing, it’s generally best to get in touch with your loan servicer as opposed to your mortgage broker or lender.

They should be able to answer any questions you have, whether it’s knowing where to send payments, how to make extra payments or biweekly mortgage payments, loan amortization questions, and so on.

Additionally, if having payment troubles in the future, your loan servicer should be the one to call to discuss options.

Remember, the lender is typically just there to help process and close your loan, then hands off the reins to a servicer from there.

Mortgage Servicing Transfers

  • Many home loans are transferred to loan servicing companies shortly after funding
  • You should receive a letter within 15 days of your loan being transferred
  • The new company’s contact information should be prominently displayed
  • It will also include the date when the old servicer will no longer accept payments
  • And the date when the new servicer will start accepting monthly payments

One of the most important things to do after your mortgage closes is to take note of who your loan servicer is.

Unfortunately, mortgage servicing rights are frequently transferred shortly after your loan funds, which can make it confusing to know who to pay.

Add in all the junk mail you might receive as a new homeowner (like mortgage protection insurance) and it could get really murky.

The good news is lenders and loan servicers must adhere to certain rules regarding the transfer of servicing rights.

After your mortgage funds, look out for a letter in the mail from the entity that closed your loan regarding a servicing transfer. You may also receive a letter from your new loan servicer as well.

It should clearly explain who will be processing your mortgage payments going forward, and is required to be sent 15 days prior to your loan’s servicing rights being transferred to the new servicer.

The letter should include all the relevant contact information you’ll need to ensure payments are sent to the right company at the right time.

Take note of when they’ll begin accepting payments, and when the old company will stop accepting payments.

In my opinion, it doesn’t hurt just to call the company and make sure everyone is on the same page before you send your payment, just to avoid a mess.

If you do make a payment mistake, there are some protections in place if it’s within 60 days of the servicing transfer, per the CFPB.

During this time, the new loan servicer can’t charge you a late fee or mark the payment as late if your payment was sent to your old servicer by its due date or within the grace period.

Who Are the Top Mortgage Servicers in the Country?

1. Quicken Loans
2. Regions Mortgage
3. Huntington National Bank
4. TD Bank
5. Chase
6. M&T Mortgage
7. SunTrust Mortgage (Truist)
8. Bank of America
9. Guild Mortgage
10. Citizens Mortgage

Quicken Loans was the highest-ranked mortgage servicer for the seventh consecutive year in 2020, per the latest U.S. Primary Mortgage Servicer Satisfaction Study from J.D. Power.

Both USAA and Navy Federal actually have higher rankings than all the companies listed above, but don’t meet the survey’s award criteria.

In other words, you should have a very good customer experience with those two companies as well.

Who Are the Largest Mortgage Servicers in the Country?

These are listed in alphabetical order since I don’t have figures available to rank them by total servicing volume. But they are some of the largest mortgage servicers in the country.

All of these companies service billions of dollars in home loans for customers, which they either originated themselves or acquired from other banks and mortgage lenders.

If you have a mortgage, there’s a good chance one of the companies on this list handles your loan servicing.

Tip: Always take the time to make sure you’re actually dealing with your loan servicer and not some phony entity.

Source: thetruthaboutmortgage.com

Apache is functioning normally

The mortgage industry has its own language, and in order to understand it, homebuyers need to learn different acronyms and jargon when shopping for a home loan. A typical home loan payment or mortgage payment involves a single payment, which is the sum of four different line items: the loan principal, interest, taxes, and insurance – also referred to as PITI. 

Before you set your sights on a home, know if you can afford the costs by learning what PITI is and how it impacts your monthly mortgage payments.

What does PITI stand for? 

PITI stands for the loan principal, interest amount, taxes, and insurance on your home – the four major elements that make up mortgage payments. 

Homebuyers often underestimate the true cost of homeownership by failing to take into account property taxes and homeowners insurance. It’s crucial that you budget for all the components of your mortgage payment before purchasing a home.

What is PITI? The four components

Now that we know what PITI stands for, let’s break down each of the four components and analyze the individual elements that make up your monthly mortgage payment.

1) Principal

The mortgage principal is the loan amount before any interest is calculated. This is the base amount of your home purchase price minus any down payment you make. 

We’ll use a hypothetical home purchase for reference; if you buy a home for $450,000 with a 20% down payment ($90,000), your mortgage principal amount will be $360,000.

Over your mortgage term, you pay substantially more than the original $360,000 to the lender in the form of loan interest. The principal is the base amount used for loan calculations to determine if they will extend a loan to you. 

2) Interest

Your mortgage interest rate is what you pay the lender as part of your monthly mortgage payment to borrow the funds to purchase your home. The mortgage lender calculates interest as a percentage of your outstanding principal. If your principal loan is for $360,000 and your lender charges you an interest rate of 6%, this means that you will pay $21,600 (6% of $360,000) in interest for the first year of your mortgage.

Your mortgage interest and principal payments are itemized on a mortgage amortization table. The amortization charts show how much each mortgage payment pays down your principal and interest. When you first start making mortgage payments, most of your monthly payment goes toward interest instead of the principal. 

This split shifts over time, and eventually, the amount you pay toward interest decreases, and more is paid toward the principal. As the principal amount of your loan decreases, you start to earn equity on your home. Equity is the portion of your home that you own outright. Your interest decreases as well, as you only pay interest on the principal amount you have not paid off.

For our example, you will pay $21,600 in interest over the first year of your $360,000 mortgage. By the time you have paid down $260,000 of that principal, your principal amount will be $100,000; at that point, you’ll pay interest of $6,000 annually (6% of $100,000).

3) Taxes

When you own your house, you pay taxes on the property to your local government to maintain roads, emergency services, police, firefighters, schools, and more. Buyers often overlook property taxes when estimating homeownership costs, but it is important to consider this recurring annual cost when you’re searching for your new home. Property taxes vary by location and are the most expensive tax homeowners pay. Taxes may be higher in a newer neighborhood or an area coveted by many homeowners. They are often less if you live just outside coveted neighborhoods and in rural areas. 

The amount of property tax you pay is determined by the local property tax rate and the value of your home. A general guideline to estimate property taxes is to allocate approximately $1 for every $1,000 of your home’s value, paid on a monthly basis.For example, if your home is worth $450,000, you can expect to pay around $450 per month in property taxes or $5,400 per year. 

As part of the home purchase process, most states require that you get an unbiased, official appraisal to estimate your taxes accurately. Your lender usually orders the home appraisal and includes the cost in their list of closing costs. After you close on your home purchase, keep in mind that your local government will regularly reassess properties every few years for tax purposes, which could lead to a change in your tax bill.

4) Insurance

The “insurance” component of PITI refers to homeowner’s insurance and, when it’s required, private mortgage insurance (PMI). Let’s discuss each of these concepts in more detail. 

Private mortgage insurance (PMI)

Your PMI rates depend on how much of a down payment you made and your credit score. If you’re putting down less than 20% on a conventional loan, you’re required to pay for private mortgage insurance (PMI), which protects the lender if you default on your mortgage payments. Once you build at least 20% equity in your home — and your loan-to-value (LTV) ratio is 80% or less — you can get rid of PMI. For FHA loans, a similar mortgage insurance premium has to be paid throughout the life of the loan on any FHA-backed mortgage loan.

If your PMI comes in at a rate of 1%, here’s how you’d calculate a mortgage of $360,000: $360,000 x 1% = $3,600 per year; $3,600 ÷ 12 monthly payments = $300 per month.

Homeowners insurance

Most mortgage lenders require a homebuyer to purchase and maintain homeowners insurance over the entire loan term. Homeowners insurance covers you and the lender if something catastrophic happens to the home, and you need to rebuild or move. Most homeowners insurance policies cover your home in the event of a break-in, fire, or storm damage. 

Most insurance companies require you to buy additional coverage for damage from earthquakes or flooding. You can also purchase insurance riders to cover items of significant value, such as an expensive musical instrument, art, or jewelry. If you buy a condominium, you’ll also pay a homeowners association fee. Your lender may consider your HOA fee your insurance as the HOA carries its own insurance that covers the building, and thus you may not need another policy. 

Property insurance amounts can vary among different insurances. It’s wise to shop around after the seller accepts your purchase contract, and before you close on the property, to get a good idea of reasonable rates. Insurance companies consider these factors when calculating an insurance premium:

  • The home’s value
  • Whether you live in an urban area or a rural area
  • Whether you live in an area with high climate risk
  • How close your home is near a fire department or fire hydrant 
  • Whether you have an insurance risk on your property, i.e., something could injure children, such as a trampoline, pool, or specific dog breed 
  • How many insurance claims you make each year for other types of insurance

When estimating your homeowner’s insurance costs, it’s helpful to keep a general rule of thumb in mind. On average, you can anticipate paying approximately $3.50 per every $1,000 of your home’s value in annual homeowner’s insurance premiums. For instance, if your property is valued at $450,000, you can expect to pay around $1,575 per year for insurance coverage, which translates to roughly $131 per month.

How to calculate PITI

Before you start your search for a house, it’s a good idea to calculate PITI to determine your price range and help you find a mortgage option that will fit your budget. The exercise will make you a more rational home buyer and keep you from falling in love with a house outside your price range. 

The simplest way to calculate PITI is by using an online monthly mortgage calculator. Redfin’s mortgage calculator includes the principal and interest, taxes, insurance, HOA, and PMI. You can also add in your location for more accurate estimates.

PITI and the 28% Rule

Your PITI gives you a rough idea of what purchase price range you can afford. One way to identify a purchase price within manageable limits is to use the housing expense ratio. To ensure your ongoing ability to make your mortgage payments, home finance experts typically recommend that your housing costs should be equal to or below 28% of your monthly household budget. If your PITI is more than 28% of your monthly budget, your lender may require you to pay for additional mortgage insurance.

In our example, you can estimate your housing expense ratio by dividing your PITI by your total monthly income. If your household income is $10,000 a month, your PITI will make up about 28% of your monthly budget, well within recommended guidelines. ($2,800/$10,000 = 28%.)

Keep in mind that PITI may just account for just some of your monthly expenses when owning a home. Depending on where you live and how you are paying for your home, there may be additional costs to consider. Additionally, the components that make up PITI are broadly defined here; there is often more complexity that goes into each part of PITI.

How PITI impacts loan approval

During the home buying process, it can be easy to trick yourself into thinking you can afford a more expensive home if you only look at your mortgage’s principal and interest cost without considering the total PITI with taxes and insurance. 

For instance, let’s take a 30-year mortgage on a $450,000 property, assuming a property tax rate of 1.25% ($5,625 per year) and an annual homeowners insurance premium of $3,600. In this scenario, your monthly financial commitment would go beyond just the principal and interest amount, as you would need to allocate an additional $581 to cover taxes and insurance. Understanding and accounting for these factors will provide you with a comprehensive understanding of the actual costs involved in homeownership.

Here is a breakdown of the example discussed above. 

Principal and Interest PITI
Interest rate 7% 7%
20% down payment $90,000 $90,000
Property taxes N/A $450
Homeowners insurance N/A $131
Private mortgage insurance N/A N/A
Monthly payment $1,800 $2,381

How DTI factors in

The principal balance will factor into your debt-to-income (DTI) ratio. Your DTI ratio gives lenders an idea of how capable you are of managing money and the likelihood that you will consistently make your monthly payments. To determine your DTI, the lender uses your total minimum monthly debt obligation and divides it by your gross monthly income to arrive at a percentage. This calculation also includes payments on credit card accounts, auto loans, student loans, and other recurring debt payments. Lenders consider you a higher risk if your DTI ratio exceeds 43%, some lenders will allow a DTI as high as 50%. 

Don’t overlook other housing costs

PITI is just one fundamental concept to understand before applying for a mortgage. As you consider how much house you can afford, you’ll also need to plan for additional costs typically associated with homeownership. These include HOA or condo fees, which can range from $100 to $1,000 per month, with an average of $200 to $300. Additionally, budgeting for repairs and maintenance is crucial, with a general guideline of saving 1% to 5% of your home’s value annually. For a newer $450,000 home, this would mean setting aside $4,500 to $22,500 per year. Utility bills for electricity, water, gas, sewer, cable, trash, and internet should also be factored in, and contacting the utility company or asking the seller or neighbors can help estimate these costs.

The bottom line on PITI

Buying a home is very exciting, but before signing your mortgage contract, know what payment amount you can afford based on PITI and other monthly costs. The more you understand the home buying and mortgage process and the total cost of homeownership, the easier it will be to finalize your purchase decision. Your home purchase represents an important milestone in your life – avoid confusion and uncertainty by gaining a solid understanding of PITI and the cost of homeownership. 

Source: redfin.com

Apache is functioning normally

At least not yet…

As you probably know, the Fed slashed the federal funds rate to near-zero yesterday afternoon to prop up the economy as it contends with the growing coronavirus pandemic.

If you read the headlines, you might falsely assume the Fed just slashed mortgage rates by a full percentage point.

Combined with the half-point cut two weeks ago, you might be led to believe that mortgage rates are now truly rock bottom.

But in reality, those actions had nothing to do with consumer mortgage rates.

Those rate cuts were intended to help banks borrow from one another to ensure they maintain minimum reserve requirements.

When that key rate is lowered, the money supply rises and lending to businesses and consumers increases, thereby spurring economic activity.

That’s the whole point.

Didn’t the Fed Just Lower Mortgage Rates?

  • The Fed rate cuts have no direct impact on mortgage rates
  • They can serve as a guide for long-term rates, but the federal funds rate isn’t your mortgage rate
  • Your mortgage rate didn’t just drop by 1%
  • But the MBS buying program known as QE4 should lead to lower mortgage rates for consumers over time

Ok, great, so how does this affect mortgage rates?

Well, the Fed also announced the purchase of at least $200 billion in agency mortgage-backed securities (QE4), which is intended to bring down mortgage rates.

However, and this is a biggie, long-term fixed mortgage rates weren’t anywhere close to zero when they announced the news.

They actually hit record lows two week ago, which set off a refinance frenzy, and in turn caused an oversupply in the market.

Simply put, mortgage lenders were over capacity, and when there’s too much supply and not enough demand, prices must be adjusted.

In the case of mortgage rates, prices went up to stem demand.

This phenomenon is also driven by the fact that most mortgage lenders bundle and sell off their mortgages almost immediately after origination to investors.

If there are too many of these bundles of mortgages, known as mortgage-backed securities (MBS), floating around, prices must go down.

Or, mortgage rates must go up to make them more attractive to investors seeking higher yields.

And that’s why mortgage rates shot up after hitting record lows.

It also explains why the Fed took direct action to buy MBS, which will level the supply/demand imbalance.

In short, the Fed has agreed to be a major buyer of MBS, allowing mortgage lenders to lower mortgage rates again.

When Will Mortgage Rates Fall to 0%?

  • Mortgage rates probably won’t ever go to 0% or anywhere close
  • Despite European banks offering 0% rates or even negative rates
  • The Fed’s QE4 program should stabilize and lead to lower mortgage rates
  • Whether they return to record lows depends on what else goes on in the world over the next several months

Now remember, mortgage rates weren’t anywhere near 0% last week.

In fact, many lenders had raised rates so rapidly that the near-3% 30-year fixed rates were now actually closer to 4%.

If you’ve been following mortgage rates recently, you’ll know that a 4% 30-year fixed mortgage rate is nothing to get excited about.

Not only does it feel very average, it probably is high to a lot of homeowners. And it’s not just emotional.

There are plenty of homeowners out there with sub-4% interest rates, so for these millions of borrowers, there will be no financial incentive to refinance.

When lenders collectively raised rates last week, they effectively reduced the refinanceable population by millions of individuals.

The good news is that should also work to limit MBS supply, and when coupled with the Fed buying MBS, push mortgage rates lower.

The problem is mortgage rates are nowhere close to zero, as they are in European countries, where they are even being offered below zero (negative rates).

So really, the Fed’s move is intended to keep the secondary market for mortgages intact, first and foremost.

To ensure that mortgage rates don’t rise further, crushing an industry that seemed primed for a windfall.

In other words, the first step here is stabilizing mortgage rates and erasing some of last week’s damage.

The next step is trying to rally back down to the record lows seen two weeks ago.

From there, the 30-year fixed would still be perched at/above 3%, so a rate of zero or anywhere close to it would still be worlds apart.

And if you believe the head of the nation’s largest retail mortgage lender, Quicken Loans, we won’t even see 30-year fixed mortgage rates fall below 3%.

So regardless of what the Fed is doing, you might want to temper your expectations.

That being said, we could test new all-time lows eventually, but it’s probably going to take some time to play out.

Lenders have no intention of getting caught out twice, so they’ll be very hesitant to lower rates significantly at the moment.

If we’re able to resolve the coronavirus in the meantime, that could actually work against interest rates, assuming the economic damage is less than what’s baked in and we get back into gear.

In summary, yesterday’s Fed announcement is excellent news for mortgage rates, but it’s going to take time and favorable conditions for mortgage rates to even get back down to 3% again.

Source: thetruthaboutmortgage.com

Apache is functioning normally

The mortgage space is unique from a lot of other businesses in that the customer isn’t always right.

And special offers are typically few and far between. This is mostly because of the complexities involved with closing a home loan.

For example, it’s pretty easy to find a promo code when booking a hotel, or snag a sign-up bonus for opening a credit card.

But when it comes to a home loan, you typically aren’t offered much other than perhaps speedy service, or a money-back guarantee if things go wrong and it’s entirely their fault.

Price-matching is also pretty hard to come by, though Chase has just launched such a deal.

Get $200 If Chase Can’t Match or Do Better

In honor of National Homeownership Month, Chase has rolled out some new offerings in their home loan department.

This includes homebuyer education resources, a Closing Guarantee, and as mentioned, a price-matching pilot program.

The way it works is fairly straightforward – Chase will give home buyers $200 if they can’t match or beat a competing loan offer.

To be eligible, you need to complete an initial purchase loan application with Chase by September 30th, 2023.

And you must provide an official Loan Estimate (LE) from another licensed lender that includes the same loan term, purpose, product, and loan type.

Assuming Chase can’t match or beat it, they’ll provide you with $200 within 30 days of withdrawal of the Chase application.

At the moment, this is only available to customers purchasing properties in the states of Arizona and Ohio.

And the following counties in Texas: Austin, Brazoria, Chambers, Fort Bend, Galveston, Harris, Liberty, Montgomery, and Waller.

It’s also only valid for customers who hold an active Chase personal deposit account opened on or before May 1st, 2023.

Your loan scenario has to be pretty vanilla, meaning no investment properties, 2-4 unit properties, second homes, home equity loans or second mortgages.

Chase $5,000 Closing Guarantee and Lock and Shop

Aside from the new price match offer, Chase has a Closing Guarantee that provides $5,000 if they’re unable to close a home purchase loan on time.

As always, you need to hold up your end of the bargain by getting income/asset documents and signed disclosures to Chase in a timely fashion.

And the contract closing date must be at least 21 calendar days after receipt of a completed home loan application for conventional loans (30+ for FHA/VA).

Of course, delays caused by third parties or due to force majeure events won’t result in compensation.

This is kind of one of those things where if you’re using Chase anyway, keep an eye on it as you might be compensated if they don’t close on time.

Additionally, Chase launched a new “Lock and Shop” option that lets you lock in your mortgage rate for 90 days before finding a home to buy.

That way you have assurances that your mortgage payment won’t go up if mortgage rates unexpectedly rise during the home search.

And there is no upfront fee for this option when using Chase Homebuyer Advantage, which is their conditional letter of approval you can obtain upfront.

You get 60 days to find a property to purchase, and a one-time float down option will be available if mortgage rates improve during that time.

This can be combined with the Closing Guarantee as well.

Chase Offering Grants of $2,500 and $5,000 in Select Areas Nationwide

Lastly, you can search for down payment assistance and other grants via Chase’s Homebuyer assistance finder.

Simply enter an address and it will show you matched programs that might be available.

In select areas, the Chase Homebuyer Grant provides $2,500 or $5,000 toward a new home purchase.

The company notes that a $5,000 grant is available to eligible home buyers purchasing a property in majority-Black and Hispanic neighborhoods throughout the United States.

Chase was the fourth largest mortgage lender in the U.S. in 2022, per HMDA data. They funded about $99 billion in home loans last year.

Only three lenders originated more mortgages, including United Wholesale Mortgage (UWM), Rocket Mortgage, and Wells Fargo.

As always, be sure to look at the big picture when comparing mortgage offers. This includes the interest rate, lender fees, and the company’s overall competency and service.

Source: thetruthaboutmortgage.com

Apache is functioning normally

Everyone likes a discount, right, even if it’s on a small one-time purchase that equates to a nominal amount. For one reason or another, it just feels like a win.

It’s obviously even sweeter if you get a discount on a big-ticket item, as the savings will be much larger.

Better yet, how about a discount on something that you could be paying off for the next 360 months, like your home loan? Now we’re talking!

I did some research and came up with a list of mortgage lenders with the “best mortgage rates” to consider if you’re in the market to finance a new home purchase or refinance an existing mortgage.

There are literally thousands of mortgage lenders out there, so it’s easy to miss some along the way if comparison shopping.

Here are 10 that might offer a discount relative to other banks and lenders out there, not only because they seem to offer low mortgage rates, but also limited or no lender fees.

The one caveat here is no one mortgage lender can be the cheapest all of the time, for all borrowers.

So be sure to always take the time to shop around and get multiple quotes, even if it takes some additional legwork. Sure, it’s not fun but nor is spending more money.

Also, if you want the best mortgage rate, you’ve got to be a good borrower.

That means coming to the table with an excellent credit score, a decent down payment, and checking all the other boxes that affect mortgage rates.

You can’t expect the lender to do all the heavy lifting.

Better Mortgage

Aside from being a tech-savvy lender with a digital mortgage platform, Better Mortgage also prides themselves on not charging a loan origination fee. Or any lender fees or commissions for that matter.

Often, this fee can be 1% of the loan amount, so if you take out a $300,000, that’s $3,000 right there. Then there might also be additional fees for processing, underwriting, and so on.

They also openly advertise their daily mortgage rates right on their website, so they’re pretty transparent about their pricing as well.

In summary, you could get a discount and breeze through the home loan process thanks to their technology – they can fund 100%-digital loans without even a single phone call.

They’ve got a 4.6-star rating out of 5 on LendingTree with a 91% recommendation rating.

CIT Bank / OneWest Bank

If you choose to work with CIT Bank or OneWest Bank to get your home loan, they provide a number of discounts on top of their already low mortgage rates.

This includes a $525 cash back bonus if you have or open a CIT Bank or OneWest Bank deposit account before closing on your mortgage with them.

Additionally, they offer mortgage rate discounts if you make new deposits, including 0.10% off your rate with 10% of loan amount in new deposits, and 0.25% off if you can muster 25% of the loan amount in new deposits.

At last glance, they had a 4.5/5 on Zillow based solely on their home loans business, so they come highly rated as well.

Costco Mortgage

Folks looking for a deal often head to Costco, and you can actually shop your mortgage with the big-box retailer as well.

While not a direct mortgage lender, they have partnered with a variety of vetted lenders that have agreed to cap their lender fees.

For example, Gold star members pay lender fees of $650 or less, while Executive members only pay lender fees of $350 or less.

If the mortgage rates from their partner lenders are competitive, you might wind up with a low rate and limited fees, which is an excellent combination.

The Mortgage Program for Costco Members has a 4.8-star rating out of 5 based on Trustpilot, and the individual lenders involved have similarly-high ratings from past customers.

Intelliloan

I added Intelliloan to this list because they won’t stop talking about their mortgage rates. In fact, the first thing you’ll see if you visit their website is mortgage rates.

Their latest refinance rates match their APRs, which means they’re advertising their interest rates without any lender fees or discount points.

The company also offers a Rate Protection Promise where they’ll refinance you without lender fees if interest rates fall significantly within three years of your initial loan closing.

They’ve got excellent reviews across all the major ratings websites, including a 4.9-star rating out of 5 on LendingTree, with a 98% recommend score.

LoanFlight Lending

The holy grail for homeowners is a low mortgage rate with limited or no fees.

After all, a low rate that requires you to pay multiple discount points might not truly be low, but one that only requires a $1 in fees is usually as good as it looks.

LoanFlight Lending tends to advertise on Zillow a lot, and often features some of the lowest fixed rates listed, along with just $1 in lender fees.

That’s a tough combination to beat if you’re looking to save on your mortgage. They also have very good customer reviews to boot, with a 4.76-star rating on Zillow and a 4.7 on LendingTree with a 91% recommend rate.

The only downside appears to be the fact that they’re licensed in just 12 states.

Lower Mortgage

As I’ve said before, with a name like Lower Mortgage, you kind of have to offer low mortgage rates. Oh, and low lender fees too.

They say they do both, and the cherry on top is a Free Refi for Life deal, whereby you won’t be charged any lender fees on a future refinance with the company.

So if 30-year fixed rates do go down and they happen to be offering low rates relative to the other guys, you can get that new low rate sans fees.

The company also has great reviews, including a 4.9-star rating out of 5 based on LendingTree with a 99% recommendation rate.

Reali Loans

Formerly known as Lenda, Reali Loans, Inc. is the home of “no-nonsense home loans.” What that means is you won’t be charged traditional loan commissions or any lender fees.

In the past, I found that their interest rates were quite low when I played with the little rate slider on their website.

Like other fintech newcomers in the mortgage space, they lean heavily on technology to make the loan process less cumbersome and faster overall. That tech also allows them to offer more competitive rates to borrowers.

Reali Loans currently has a 4.57-star rating on Zillow and similarly excellent reviews on Trustpilot.

Redfin Mortgage

If you’re buying a home in certain states, one perhaps unexpected mortgage lender to consider is Redfin Mortgage.

Yes, the real estate brokerage also launched a home lending division and seems to have really competitive mortgage rates.

Additionally, they don’t charge lender fees, so the mortgage APR should be just as low as the mortgage rate.

The only downside is they don’t offer refinance loans, at least not at the moment. But that could change in the future.

On top of the low rates and lack of fees, they offer a $1,000 mortgage closing guarantee that promises to get you to the finish line in either 25 or 30 days (depending on the type of pre-approval) or you’ll receive a check.

Sebonic Financial

This so-called digital startup, which is actually the fintech arm of Cardinal Financial, a top-40 mortgage company nationally, often advertises mortgage rates with just $1 in lender fees.

In other words, you’re typically getting a no cost loan from Sebonic Financial, at least with regard to lender fees.

And they seem to still offer highly competitive refinance rates relative to other lenders, which often charge the usual fees that can amount to thousands of dollars due at closing.

They are also a highly-rated mortgage lender, with a 4.49-star rating out of 5 based on more than 3,000 customer reviews on Zillow.

Wyndham Capital Mortgage

Lastly, we’ve got Wyndham Capital Mortgage, which promises no hidden lender fees and competitive, below market mortgage interest rates

Aside from no hidden fees, they also don’t charge a loan origination fee. So if their mortgage and refinance rates are also low, that’s a pretty solid deal.

On top of that, they say they can offer discounts on costly things like title insurance because of their relationships with preferred settlement agents.

In terms of customer satisfaction, they’ve got a 4.8-star rating out of 5 on LendingTree from nearly 7,000 reviews, and 99% of customers would recommend them.

There are many more lenders out there, and you should certainly search locally as well as online to explore all of your options, including credit unions, local mortgage brokers, and more.

Remember, your monthly mortgage payment will stay with you for a long time, so putting in a few extra hours at the start can really pay dividends over the years.

Source: thetruthaboutmortgage.com

Apache is functioning normally

While there’s a lot of uncertainty and doom and gloom in the world right now due to COVID-19, one bright spot appears to be mortgage rates.

Sure, they’ve been on a rollercoaster ride of late as lenders grapple with secondary market upheaval and capacity issues, but the 30-year fixed remains near record low territory.

It averaged 3.50% last week, per the latest Freddie Mac survey, which given the environment right now should absolutely be taken with a grain of salt.

But once the Fed’s new MBS buying spree pays dividends, we might see some normalcy with interest rates again, and hopefully a more stable mortgage industry.

Wells Fargo Pegs the 30-Year Fixed at 2.90% for Much of 2020

That brings us to a forecast from Wells Fargo, the largest U.S. mortgage lender on total volume, which pens a weekly economic commentary.

In it, they note that the conventional mortgage rate for the second and third quarter of 2020 is expected to average 2.90%. And only rise to 2.95% for the fourth quarter of 2020.

That’s down from 3.30% in the first quarter, and a sign that low mortgage rates should persist despite the recent disruptions partially attributed to COVID-19.

The caveat here is their forecast probably relies on somewhat normal market conditions, for which these are most definitely not.

This explains why Quicken Loans CEO Jay Farner was quick to dampen the possibility of a 30-year fixed below 3%.

These aren’t normal times, and lenders are under no pressure to lower mortgage rates more than they already are.

If you’ve got more demand than you know what to do with, why would you lower the price? The answer is you wouldn’t.

Spread Between 10-Year Bond Yield and Mortgage Rates Near All-Time High

  • The 10-year bond yield is close to its all-time low
  • The spread between mortgage rates and 10-year yields is near an all-time high
  • If spreads normalize over time it’s possible the 30-year fixed could dip below 2%
  • But busy lenders have little incentive to lower mortgage rates right now

For those who look at the 10-year bond yield to get an idea of the current price or direction of long-term mortgage rates, it’s becoming increasingly flimsy.

Per the latest insight report from mortgage advisory Stratmor Group, the spread between 30-year fixed mortgage rates and the 10-year bond yield recently increased to 250 basis points, which is nearly an all-time high.

In more normal times, the spread is close to 170 basis points, so those watching the 10-year plummet to new all-time lows might be disappointed, at least for now.

At last glance, the 10-year yield was around 0.65%. If we add 250 basis points, we get a 30-year fixed around 3.15%, which sounds about right with some mortgage lenders.

If the spread was more typical, lenders could be offering the 30-year fixed at closer to 2.50%. But don’t hold your breath.

Again, they’ve got no incentive to lower interest rates from where they are at the moment. So no, you aren’t getting a 0% mortgage rate or anything close.

Remember, apply for a mortgage when things are slow if you want the true discount passed along.

Speaking of, there’s certainly a case for waiting to refinance your mortgage.

Some arguments include a lower interest rate, lenders who are less busy and more attentive, and the idea that there might some more favorable forbearance offered to existing homeowners.

The possible downsides to waiting to refinance include the possibility of interest rates rising, and also the grim chance one might lose their job in the meantime, or suffer some break in employment that jeopardizes the entire application.

Those who need a jumbo loan may want to move a little faster, given there have been some dislocations in the non-agency market due to liquidity concerns, along with tighter underwriting standards.

Just take a look at non-QM lending, which has all but been put on hold in the past week or so due to warehouse lenders pulling the plug on anything deemed too high-risk.

Source: thetruthaboutmortgage.com