Can YOU Get 4.5% Mortgage Rate?

Last night, I speculated that mortgage rates would open in the 4.5% range because of the Fed’s post-market Press Release about its mortgage-backed securities market intervention:

Mortgage markets are responding with EXUBERANCE…joy…unbridled passion!  In post-market trading, the 4% coupons are trading at a premium, suggesting that  mortgage rates should open below 4.5% tomorrow.

That…didn’t quite happen. Mortgage-backed securities open higher, then fell off the table, then recovered, then fell again.  Lenders offered wholesale par rates (with no yield spread premium) at 4.625% and 4.75%, today.  My article moved over 20 people to call to find out about a potential refinance and most seemed frustrated that the 4.5% rate was not available, yet.

My hypothesis is that the mortgage traders were still on vacation, in Cabo, and didn’t see the Fed’s Press Release as sufficient cause to jump on a plane and get back to Wall Street.  I still think we’ll see a 4.5% mortgage rate…next week.  Here’s why most borowers will never get that rate for their refinance:

It won’t stay down at 4.5% for long. We saw this happen, for about three hours, about two weeks ago.  Borrowers who “had it tee-ed up” got that rate, with a 1% origination fee.  “Teeing it up” means you’re ready to lock your rate.  Lender require the following to lock a mortgage rate:

  • Credit report pulled
  • Loan application completed and entered into the system.
  • Documentation for income, and assets, ready to fax, email, or send via overnight mail.

Lenders are cracking down on lock commitments.  The rate locks are coming with conditions, meaning that the loan file needs to be submitted to underwriting within ten business days.  This means that a title report needs to be supplied (3-5 days) and an appraisal needs to be uploaded (7-8 days).  That leaves very litle time for deliberation, if mortgage rates “just touch” 4.5%.

As such, deposits for appraisals, condominium certifications, and/or credit reports need to be supplied at rate lock commitment.  What this means is that your originator will collect about 4 or 5 hundred bucks from you.  I have no doubt that some of the originators who comment on my articles will try to “sell you” with the comment that “upfront fees are evil” or “take your time and decide”.  Others will say that I’m using fear to intimidate you.

Okayfine.  I’ve worked in financial services, both trading mortgage-backed securities and originating mortgages, since 1989.  It is my professional advice that you need to be prepared if you choose to take advantage of this opportunity.  These are unusual times with extraordinary benefits for the swift.  Banks know that they hold the upper hand with these low mortgage rates; they’ll only reward the prepared.

Contact me if you have questions. The phone is the most efficient and reliable medium.

PS:  The requirements to get this “magical rate” will be steep.  You must have excellent credit, be refinancing the amount of the mortgage you had when you bought the home (meaning you didn’t take out any cash from the property), and have plebty of documentable income.  If you don’t meet those steep criteria, don’t fret.  While you may not qualify fnr that rate, you will still be offered an historical one.

PPS:  If you contacted me today, I’m still digging out from under.  I’ll be scanning and e-mailing promised documents on Friday.

PPPS:  I almost forgot; Happy New Year !