High rates...

As everyone has seen the rates have been going up the last week, and today are around 5.625 at no points. A few weeks back, they were around 4.75. There are a lot of reasons for the increase; the rally in the stock market, the 10 year bond pushing 3.85 and the inconsistency in the government buying MBS, Mortgage Backed Securities. Some analysts expect the rest of the year to have a lot swings for mortgage rates. Clients need to be prepared and educated about this. Some originators are submitting files to be underwritten with a lock, hoping the rates get better. If they do, you need to lock and protect it. You also should ask your originator, if your file is approved, how long is that approval for, to see how long you can keep floating it. All banks will require an appraisal to underwrite a loan. If you do receive the approval, you can always look at a lock period less than 30 days to see if your rate is available. Most banks offer a 15 day lock and some even offer a 7 day lock. If you are going with an FHA loan, be aware, that banks will require an FHA case number, before they underwrite the loan. I know everyone is scared of the word, “ARM” or “Adjustable Rates”, but right now they are pricing very low. As an ex., the 5 yr. FHA ARM is in the low 4s. These ARM’s have a 1 year adjustments of 1 point, which means, that by year 7 you would be in the 6’s. One advantage with FHA is that anytime during the 5 year period you can streamline the loan into a fixed rate. I know there is a risk, that the fixed rate may not get to where you want it to be, but on streamlines, they are don’t as No Cost refis, and can be without an appraisal, documenting income and/or assets.


Maryland Loan Officer
King Farm Real Estate