Mortgage Rates

February 20, 2017 08:56 AM Eastern

Refinance rates now in Woodbridge, NJ [Change this]

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    Home Price (Purchase)
    When you get a mortgage to purchase a home, the lender uses the lower of the agreed-upon purchase price or the property's appraised value to determine your maximum loan amount. The loan amount divided by the property home price equals your loan-to-value ratio, or LTV. That ratio is one of the major factors that lenders use to set your mortgage rate. If your LTV exceeds 80 percent, you'll probably be required to pay mortgage insurance, which increases your monthly payment. If the property appraises for less than the agreed-on purchase price, you are not usually required to complete the purchase.
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    Home Value (Refinance)
    This is your estimate of the current value of your property. When you refinance, your home is almost always evaluated by a licensed appraiser. The refinance loan amount divided by the property's appraised value equals your loan-to-value ratio (LTV), and that number is one of the major factors that determine your mortgage rate. To get an accurate refinance rate quote, your home value estimate must be reasonably accurate.
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    Down Payment
    The down payment is the amount you pay upfront when you finance property. Your purchase price minus your down payment equals your mortgage amount. The higher your down payment, the more likely you are to be approved for a home loan. If your down payment is less than 20 percent of the purchase price, you'll probably be required to pay for mortgage insurance, which increases your monthly payment.
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    Credit Score
    Your credit score is a number designed to measure your credit-worthiness. It's based on a formula that combines many factors, including your payment history, amount of credit used and number of accounts. This number is used by lenders to calculate the probability that you'll default on your mortgage. Most lenders won't approve mortgages to applicants with credit scores lower than 620. Your credit score is one of the most important factors that determines your mortgage rate - applicants with higher scores are offered better mortgage rates.
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Mortgage rate quotes displayed on LendingTree LoanExplorer℠, including loan pricing data, rates and fees, are provided by third party data providers including, but not limited to, Mortech®, a registered trademark of Zillow®, LoanXEngine, a product of Mortgage Builder Software, Inc., and LoanTek, Inc.

Mortgage Rate Trends

Monthly | Daily

If this is your first time viewing the following daily report, you'll probably benefit by reading all the way to the end. That would give you the whole picture on the trends you need to know about, and an idea of what you should be looking for each day. But the information that changes daily or frequently is all in earlier paragraphs of each report. So old hands don't need to go beyond "The Longer Term" below.

Mortgage Rate Lock Recommendation

Feb. 17, 2017 - Float

Today's Outlook

Judging from early market trends, it looks as if mortgage rates might fall again today, possibly quite sharply. However, those trends frequently change speed or direction during the day, so a holding steady or rise remain possible. Still, if we were currently buying a home, we'd float our rate now, but would check back on Tuesday morning to see how things have changed. Markets will be closed on Monday for Presidents Day, and this report won't appear that day.

If You're Floating Strategically

For months now, we've been suggesting that braver readers might consider floating – regardless of daily fluctuations – in anticipation of a possible fall in mortgage rates. Well, that fall began Dec. 27, and average rates for 30-year fixed-rate mortgages (FRMs) have since bottomed out at 27 basis points (a basis point is one-hundredth of 1 percent – see below for a longer explanation) below that day's level. Yesterday, they were 12 basis points lower, so some of those gains have been slowly slipping away amid both rises and falls.

Up until last Thursday, falls had been outweighing rises, but since then we had five consecutive business days of rises, and that run was broken only yesterday. In other words, there have been repeated swings of late, which makes forecasting into the future beyond a a day or so challenging.

So many observers would urge you to grab your gains (lock) soon in case upward movements resume and quickly wipe out gains. Meanwhile, others might advise you to continue to float in the hope falls will continue. Given the unpredictability and potential volatility currently in markets, only you can decide whose advice to take. And what you choose to do will be largely down to your personal tolerance for risk. For what it's worth, if we were in your shoes, we'd lock the next time rates look likely to rise significantly, but we're notoriously cautious.

If you do continue floating beyond then, it's often a good idea to set an upper limit on the rate you're comfortable paying, and to resolve to lock and cut your losses when that limit is reached. Use the LendingTree mortgage calculator to model how rate changes affect your monthly payments. Setting a cap may help you avoid getting trapped in a destructive upward spiral that doesn't end before you're forced to lock.

Read on for more ...

Today

No "market moving indicators" (releases of important domestic economic data) were published this morning, the U.S. Treasury has no auctions of bonds, bills or notes on its calendar, and only one senior Federal Reserve official, Cleveland Federal Reserve Bank President Loretta Mester, has a speaking engagement.

Of course, the absence of data and auctions doesn't guarantee a quiet day for markets, and likely causes of changes in mortgage rates today include domestic political news that affects the economy, foreign economic news (the upcoming French presidential election is currently causing jitters) and general market sentiment.

Soon after 10:00am ET, yields on 10-year U.S. Treasury bonds, which are usually closely tied to mortgage rates, were appreciably lower. While those yield trends on those bonds at that time of the morning frequently turn out to be accurate predictors of the direction of travel for the day's mortgage rates, they slow, accelerate or reverse sufficiently often that they can't be relied upon as a basis for making important financial decisions. And in any event, the relationship between those and mortgage rates can sometimes become elastic.

Earlier, major foreign stock-market indexes across Asia and Europe were nearly all lower. Twenty-one minutes after opening, the Dow Jones industrial average was down 0.23 percent. At 9:44am ET, U.S. crude oil prices stood at $53.13/barrel, compared with the $53.40/barrel seen at 9:56am ET yesterday.

Recent Mortgage Rates

Average rates for 30-year FRMs fell 6 basis points yesterday, according to Mortgage News Daily (MND). That made a dent in the 14-basis-point rise that occurred since last Thursday, bringing that down to 8 basis points. Are we now set for another bout of falls? It's too soon to say.

To add some context, the average yesterday was 61 basis points above its level on the day before the presidential election. So, based on a nationwide average, a "top-tier borrower" (someone with a great credit score, small non-mortgage debts and a big down payment) might on Nov. 7 have been offered a rate of 3.59 percent on a 30-year FRM. Yesterday, that same applicant would likely have had to pay 4.20 percent. Still, he or she could have paid 4.38 percent in mid-December, according to MND figures.

The average rate nationwide for a 30-year FRM during the week ending Feb. 16 was 4.15 percent with an average 0.5 point, according to Freddie Mac's latest weekly rates survey, published yesterday morning. It was 4.17 percent during the week ending Feb. 9, and 4.19 percent seven days before that. This time last year, the average 30-year FRM came in at 3.65 percent. Although Freddie Mac's weekly figures are accurate over the long term, they often lack the timeliness and granularity of other sources, even on their day of publication.

Freddie Mac chief economist Sean Becketti commented in a statement accompanying the latest data:

For the last 46 years, the 30-year mortgage rate has been almost perfectly correlated with the yield on the 10-year Treasury, but not this year. From Dec. 29, 2016, through today, the 30-year mortgage rate fell 17 basis points to this week's reading of 4.15 percent. In contrast, the 10-year Treasury yield began and ended the same period at 2.49 percent. While we expect mortgage rates to fall into line with Treasury yields shortly, this just may be a year full of surprises.

The Longer Term

In its January Mortgage Finance Forecast, the Mortgage Bankers Association reckons the average rate for 30-year FRMs will creep up during every quarter until the end of next year, starting 2017 with a quarterly average of 4.3 percent and ending it at 4.7 percent. It expects further increases in later years, with rates reaching 5.1 percent by the end of 2018, and averaging 5.3 percent through 2019.

Fannie Mae's January Housing Forecast predicts rates for 30-year FRMs will average 4.2 percent during the first three quarters of 2017. It says they'll rise to 4.3 percent in the last quarter of this year, and hold at that level for the first nine months of 2018. They're then expected to rise to 4.4 percent.

In their January Outlook report, Freddie Mac's economists forecast that 30-year FRM rate will average 4.4 percent through 2017, and 4.8 percent during 2018. Both those forecasts are higher than they were in December.

You may prefer to see all these numbers as a sign of how difficult it is to forecast rates in this challenging economic environment, rather than as reliable guides to the future.

Your Dilemma

There remains a continuing risk in choosing to float or lock your rate. True, there are opportunities for rewards should rates fall, but there is also a continuing danger of being trapped in an upward cycle that doesn't end before you have to lock.

So those who are cautious may wish to lock today, trading the possibility of future falls in rates for the security of fixing what could still be an exceptionally good mortgage deal – though only by historical standards. Those who like to gamble might prefer to wait awhile before locking, hoping there will be additional falls ahead. Only you can decide on the risk with which you personally are comfortable.

If you do choose to continue to float, it's usually a good idea to set yourself a top limit on the rate you're prepared to pay, and above which you won't go. That would allow you to cut your losses in the event rates enter an upward spiral that lasts beyond when you have no choice but to lock.

Why Mortgage Rates Move

Unlike most other interest rates, those for mortgages (except ones for existing adjustable-rate mortgages) are largely determined by the supply of money into the market from investors and the demand for such loans from consumers. That supply is heavily affected by the amount of risk investors are prepared to sustain in their portfolios. When spooked by economic uncertainty, they tend to buy safer assets, including mortgage securities, which can result in an increased supply of product (cash) that drives down the price (rates). When they're more confident, they tend to invest in riskier but more profitable assets, which reduces the supply of money for home loans, and pushes up rates. A second influence is perceptions of how inflation rates are likely to move over the long term, but that usually tends to be a less important factor in daily and short-term movements. None of this is to suggest the Federal Reserve doesn't affect mortgage rates, merely that it does so only indirectly by influencing investor sentiment.

The relationship between 10-year Treasury bonds and mortgage rates is more complicated. Investors generally view those bonds and mortgage securities as similarly secure havens for their money when they're spooked – with bonds the safer of the two. That means they tend to buy or sell both at the same time, depending on their level of confidence in the U.S. and global economies. So many lenders refer to those particular Treasury yields when setting their rates. Usually, the relationship between 10-year Treasury yields and mortgage rates is surprisingly close, though rates tend to be less volatile, and sometimes the two drift apart a little.

Some Questions Answered

Why, counterintuitively, do bond yields fall when prices for Treasuries rise? It's because you're buying a fixed return on your investment, and the more you pay for the right to that same fixed amount of money, the lower the yield you're going to get. That's a mathematical inevitability.

Why go on about "analysts' consensus forecasts" when reporting economic data? Well, they're often relevant. That's because investors frequently trade ahead of actual data based on those forecasts. So sometimes the difference between what's reported and what was expected can be as important as that between the new number and the one for the previous reporting period.

What is a basis point? Yes, it's 1/100th of 1 percent, but, when it comes to percentage points and basis points, these numbers are often mind-numbingly confusing. To give a purely theoretical example, suppose the best mortgage rate you could have gotten yesterday was 7.00 percent (let's hope it wasn't!) and that rate subsequently dropped by a single basis point. Your new rate would be 6.99 percent.

What is a market moving indicator? It's simply a release of domestic economic data designated by Bloomberg as such. As the name implies, it's a report that at least sometimes moves markets, and therefore may shift mortgage rates.

What Does it Mean to "Lock" Your Mortgage?

"Locking" your mortgage means that you and your lender have agreed on an interest rate and price for your home loan. Once your loan is locked, that's the rate and price you get, regardless of what happens in the financial markets. If rates go up, you're protected but if rates go down, you won't benefit either -- you close your loan at the rate you've locked and you can’t change it. Locks have expiration dates ranging from 30 to 60 days or more, and the longer your lock period, the more it costs. If you don't close your loan on time, you could end up paying a higher interest rate.

When Should You Lock?

You can lock in your loan at any time during the process. Until you lock your interest rate, you are said to be "floating" your mortgage. The only rule is that you have to lock in before you can close on your purchase or refinance.

The decision to lock or float your loan can have a long term impact so it’s important you make the right choice. That’s why we offer a quick rundown of the key factors that drive mortgage rates today and everything you need to know.

Mortgage Types

The type of mortgage you get will affect the type of mortgage rate you qualify for. See below for the most common types of mortgages and what rates you could be eligible for.

Conventional Mortgage

A conventional mortgage is one that is not insured by a government agency, such as HUD/FHA. It's typically a fixed-rate 30-year loan and the buyer must put down at least 20 percent of the purchase price of the home to qualify. Conventional mortgages typically come with excellent mortgage rates because of the down payment and stringent credit score requirements.

FHA Mortgage

FHA mortgages are perfect for buyers with less than 20 percent down, a less-than-ideal credit score or first-time home buyers. Since these loans are backed and insured by the federal government, lenders are able to offer low, competitive rates to buyers. You can view current, up-to-date rates from our top-rated FHA lenders to see what type of rate you'd be eligible for.

VA Mortgage

VA mortgages are reserved for veterans, active-duty personnel, Reservist/National Guard members, and their eligible surviving spouses. VA loans are incredibly attractive to those that qualify because of their no down payment requirement, no mortgage insurance premiums, low closing costs and low, negotiable interest rates.



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How Much House Can I Afford?

Use our Home Affordability Calculator to see how much house you can afford. Simply plug in your gross annual income, down payment amount, monthly debts and credit score. Our calculator will give you a range of conservative home prices up to aggressive ones.

Mortgage Rates by State

Mortgage rates can vary a lot between lenders on any given day. So, if you only get one mortgage quote, you won't have any idea if there's a better deal out there. That's why the best way to get a mortgage rate it to request quotes from multiple lenders and compare interest rates, loan terms and closing costs. It puts you on in charge and keeps the banks competing to get you the best rate possible. Remember, even .1 percent can amount to thousands of dollars over the course of a loan. Make sure you shop around!

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