Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Halifax Stopping Customers Withdrawing Funds Online - UK Brexit Banking Crisis Starting? - 21st July 19
US House Prices Trend Forecast 2019 to 2021 - 20th July 19
MICROSOFT Cortana, Azure AI Platform Machine Intelligence Stock Investing Video - 20th July 19
Africa Rising – Population Explosion, Geopolitical and Economic Consquences - 20th July 19
Gold Mining Stocks Q2’19 Results Analysis - 20th July 19
This Is Your Last Chance to Dump Netflix Stock - 19th July 19
Gold and US Stock Mid Term Election and Decade Cycles - 19th July 19
Precious Metals Big Picture, as Silver Gets on its Horse - 19th July 19
This Technology Everyone Laughed Off Is Quietly Changing the World - 19th July 19
Green Tech Stocks To Watch - 19th July 19
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

How To Take Advantage of Low Mortgage Interest Rates

Interest-Rates / Mortgages Apr 10, 2009 - 05:22 AM GMT

By: Mike_Shedlock

Interest-Rates Best Financial Markets Analysis ArticlePresident Obama declares "good news" and says Timing right for millions to refinance .
Declaring "good news" in the midst of an economic meltdown, President Barack Obama on Thursday urged families to take advantage of near-record low mortgage rates by refinancing their home loans.

"We are at a time where people can really take advantage of this," Obama said, seated with a handful of homeowners who have already lowered their bills.

But he also warned people to watch out for scam artists, cautioning, "If somebody is asking you for money up front before they help you with your refinancing, it's probably a scam."

Rates on 30-year mortgages inched upward this week but remain near the lowest level in decades, allowing borrowers with strong credit and stable jobs to save money if they refinance.

The average rate on a 30-year fixed-rate mortgage rose to 4.87 percent this week, up from 4.78 percent last week, Freddie Mac reported Thursday. That was the lowest in the history of the survey, which dates back to 1971.

Low rates have sparked a surge in refinancing activity, with nearly 80 percent of new home loan applications coming from borrowers seeking to refinance. Freddie Mac's sibling company, Fannie Mae, refinanced $77 billion in loans last month, nearly double February's volume.

"The main message we want to send today is there are 7 to 9 million people across the country who right now could be taking advantage of lower mortgage rates," Obama said in a photo opportunity in the Roosevelt Room. "That is money in their pocket."

What's The Rate?

Inquiring minds are asking "What's the rate?"

The above table is courtesy of Bloomberg . The quotes are from Bankrate.

What's The Real Rate?

The above table is an interesting but not particularly accurate reflection of the mortgage market.

A Certified Mortgage Planning Specialist who I respect a great deal (let's call him "MJ") informs me he was locking loans yesterday at 4.5% with 1 point interest. Today the rate was 1/8 point higher at 4.625%.

A second mortgage broker who I trust is David Donhoff at NoBullFinancial. Email: David at NoBullFinancial .

David Donhoff tells me that yesterday he could get rates as low as 4.25% on a 30 year fixed with 1 point (1%). Today the buydown would be 1.8%. In other words, rates change all the time.

Shop The Broker, Not The Rate

The best way to lock in a rate is to work with a knowledgeable broker who understands the business. That person can work for you (rather than for himself) and and will be willing to lock in a rate for you on dips. In other words, shop the broker not the rate.

Someone shopping rates will have to keep at it every day and still might miss the lows because rates change intraday. Furthermore, one needs to keep track of details like buydown points. The difference between a 1.8% buydown and 1% buydown can be a huge dollar savings on a big mortgage.

Finally, rates change based on FICO scores and other factors on a day to day basis as well. Someone shopping rates may not be able to sort this all out unless they are very familiar with the mortgage market.

Currently, FICO scores above 660 are needed and to get the best rate FICO scores above 680 are needed. Donhoff informs me that there is no additional benefit for FICO scores above 740.

Loan rate details can change at any time.

Extremely Attractive Rates

These rates are extremely attractive. But they are skewed. For example, interest only loans are close to 6.25% while 30 year rates are as much as 2% lower. This spread is unprecedented, as are 30 year rates at 4.25-4.5%. Both Donhoff and "MJ" think this is the bottom (or at least close to it) for mortgage rates.

Artificially Low Rates

Rates are low and people should take advantage of them while they can. But it's important to understand why rates are low. Please consider the following chart.

Fannie Mae 30 Year 4% Debt

Fannie Mae debt is on a tear. Remember that yield and price move in inverse fashion. Thus a price rally in bonds equates to lower yields. "MJ" notes that mortgage rates are 150 basis points (1.5%) better than November.

However, these prices are artificial. The government is buying Fannie Mae and Freddie Mac debt to force down yields.

30 Year Rate Lowest On Record

Bloomberg is reporting U.S. MBA Mortgage Applications Index Rose 4.7 Percent Last Week .
Mortgage applications in the U.S. rose last week to the highest level in three months as borrowing costs near record lows boosted home sales and refinancing.

The Mortgage Bankers Association's index of applications to purchase a home or refinance a loan increased 4.7 percent to 1,250.6 in the week ended April 3, a fifth straight gain, from 1.194.4 the prior week. The group's refinancing gauge rose 3.2 percent and its purchase measure jumped 11 percent.

The average rate on a 30-year fixed loan rose to 4.73 percent from 4.61 percent the prior week that was the lowest level since the group began records in 1990.

At the current 30-year rate, monthly borrowing costs for each $100,000 of a loan would be $520.44, or $65 less than the same week a year earlier, when the rate was 5.78 percent.

$750 Billion Commitment

The Fed has committed to buying $750 billion in mortgage-backed bonds. Furthermore, Fannie and Freddie are willing to refinance at up to 105% the value of the home. 100% loans will come at a higher rate or with higher fees and points but the key point is the risk of default is now being forced on the backs of taxpayers.

Nonetheless, for those with good credit who meet the required conditions of the “Making Home Affordable" program, now is a great time to be taking advantage of these historically low rates.

Eligibility Requirements

  • You are the owner occupant of a one to four unit home.
  • The loan on your property is owned or securitized by Fannie Mae or Freddie Mac.
  • At the time you apply, you are current on your mortgage payments (current means that you haven't been more than 30-days late on your mortgage payment in the last 12 months or, if you have had the loan for less than 12 months, you have never missed a payment).
  • You believe that the amount you owe on your first mortgage is about the same or slightly less than the current value of your house.
  • You have income sufficient to support the new mortgage payments.
  • The refinance improves the long term affordability or stability of your loan.

The "Making Home Affordable" program is a huge moral hazard that is going to cause further taxpayer bailouts down the road. However, if you meet the above conditions, you may as well take advantage. And even if you don't meet those conditions, it will not hurt to see if you can get a better deal than the one you are in.

By Mike "Mish" Shedlock

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at .

© 2009 Mike Shedlock, All Rights Reserved

Mike Shedlock Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules