Thursday morning, homeowners in different parts of the country awoke to find similar-sounding newspaper headlines:
The underlying story was that Freddie Mac’s weekly Primary Mortgage Market Survey showed the lowest, average 30-year fixed rate mortgage in its 38-year, rate-tracking history.
Once again, however, the headlines came too late for homeowners.
Prior to Thursday’s market open, mortgage markets had already worsened from their record-setting levels. Slowly at first, and then with momentum. The shift pressured rates higher so that when lenders issued their Thursday morning rate sheets, most showed an 1/8 increase from Wednesday’s close.
The negative momentum carried into the afternoon, too, forcing a second increase of an 1/8 percent.
The Freddie Mac survey may have been accurate when the sun came up Thursday, but by the time the sun went down, it wasn’t even close. It’s why you can’t do your rate shopping by watching newspaper headlines. Mortgage markets are volatile and rates often change without notice.
Thursday, they did it twice.
With mortgage rates are hovering near all-time lows, lots of Americans are taking advantage of refinance and home buying opportunities.
The downside of today’s unexpectedly-low rates, though, is that mortgage lenders are ill-equipped for the rush of new business.
As a result, the process of underwriting and approving new mortgage applications is taking some conforming lenders as long as 2 months to complete.
This is double the time needed as recently as six months ago.
Because there may be 60 days between the application date and the closing date, it’s important for applicants to remember that mortgage approvals can be revoked at any time prior to funding.
As mortgage applicants, there are many events that are out of our control — job security and health matters, for example. But there are also events that are within our control.
Knowing that mortgage approvals can be fragile, here are 8 things you should absolutely not do while your home loan is in process. It may be the difference between being approved by the bank, and being turned down.
Now, avoiding these items may not be practical for everyone. For example, if your car lease is expiring and you need a larger vehicle, it doesn’t mean you can’t buy the car — just check with me first to be sure the new payments won’t “break” your approval.
The same goes for accepting cash gifts from parents. There’s a right way and a wrong way to accept gifts and doing it the wrong way may prevent you from using the gift as a source of downpayment.
Mortgage lending is full of “gotchas” and with underwriting times stretching to 60 days, it’s a lot more likely that a mortgage applicant will trip into one. Following these 8 rules, though, is a good start.
The Federal Open Market Committee begins a scheduled, 2-day meeting today to discuss the country’s monetary policy. As is custom, the group will issue a press release to the markets upon adjournment.
There are 8 scheduled FOMC get-togethers annually and the post-meeting press releases are among the most powerful market-moving events of the year.
It’s not the Fed’s actual policy changes that causes fortunes to be won or lost, though.
These changes can predicted and traded — and, therefore, hedged — on Wall Street using Fed Funds Rate Futures. For example, Wall Street predicts with 97% certainty that the Federal Reserve will not make a policy change at this time.
As opposed to than policy change, it’s the verbiage of the FOMC’s press release that can really move markets. This is because the press release is a clear-eyed look into what the Federal Reserve thinks of the United States economy — its strengths, its weaknesses, and its threats.
After its January 2009 meeting, the FOMC’s press release said:
Since that meeting, though, a number of high-profile economists, including Fed Chairman Ben Bernanke, have said the likelihood of economic recovery increased for late-2009.
This is why tomorrow’s FOMC press release is so important. It will contain clues about the Federal Reserve’s next steps and current psyche. Undoubtedly, it will make a significant impact on the mortgage markets.
In general, when the Fed alludes to inflation and stronger growth, mortgage rates rise. Talk of a recovering economy and rising oil prices in tomorrow’s press release, therefore, would likely raise rates from their current low levels towards levels not seen for 6 months.
In the end, it’s what the Fed says that matters more than what the Fed does. The FOMC is expected to leave the Fed Funds Rate within its target range of 0.000-0.250 percent.
First Heritage Mortgage, LLC
6550 Rock Spring Drive, Suite 260, Bethesda, Maryland 20817-1131
Direct: 240.223.1730 • Toll-free: 866.833.LOAN • Fax: 240.223.1703
