Tuesday, January 27, 2009

Behind the Scenes with Interest Rates!

Loan Update

Today at my Tuesday office meeting, there were 2 mortgage brokers giving us updates on loans. Most rates these days are based on owner occupied purchases with 20% down, 720 or higher credit scores and 30 day pricing plus 1 point. Given that, a 30 year fixed conforming loan (under $417,000) is about 4.875% as opposed to a super conforming loan ($417,000 to $625,000) which is 5.625% and a jumbo loan ($625,000 to 3 million) which is 5.75%. Jumbo rates are currently down.

Gary Foydl from Loan Source, gave some behind the scene info on lending. #1 - Late last year the "Feds" began buying mortgage backed securities which resulted in lower interest rates. A lot of folks applied to refinance their homes which ended up clogging up the system which caused rates to go up. #2 - Lenders encouraged Buyers to pay at least 1 point (which can buy down an interest rate between 1/2 to 1 1/8 pts currently) and get more invested in holding onto their loans. #3 - As we know from getting a new loan, our loans are soon sold to other lenders in a package deal. Only 10% of those loans were able to be jumbo - which impacted the jumbo rates and availability. The result was to artificially raising rates due to clogged pipelines. Rates would vary due to timing.

Let me know if this is interesting or confusing. I like knowing the behind the scenes info - especially as it affects our market.

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