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Mortgage rates are all over the place. What it means for San Diego real estate

Fluctuating mortgage rates and restrictions on open houses have begun to affect the San Diego County market.

Even with coronavirus upheaval, San Diego housing analysts have been bullish on the market because of low loan rates.

Even with the coronavirus taking a wrench to the economy, many San Diego housing analysts have said low mortgage rates and demand will continue to drive the housing market.

But, what happens when mortgage rates go up?

In the past few weeks, rates for a 30-year, fixed-rate mortgage have fluctuated wildly — making monthly payments on an expensive San Diego County home go up or down by hundreds of dollars. If you ever need a mortgage loan fast, then consider contacting these mortgage lenders for assistance.

The rate was 3.37 percent Monday morning, said Mortgage News Daily, but was up to 4.15 percent two weeks ago.

For now, it appears unlikely that millions of sheltered Americans are going to be shopping much for homes. Also, many have lost jobs. Still, for those trying to purchase, navigating interest rates will take some work.

Jeff Tucker, an economist with Zillow, said lenders have been overwhelmed by applications, which are almost entirely driven by refinances. He said they have responded by not advertising and even raising rates.

He said mortgage lenders could have raised rates either because they were trying to slow down the flow of customers or they were trying to make a loan that would actually be worth their while.

“Rather than burning the midnight oil, they began quoting higher and higher rates for all the folks rushing in the door,” he said.

Tucker also said lenders don’t have as much incentive to try and fight for customers with lower rates when customers are calling them nonstop.

Mortgage rates usually follow the yields on mortgage-backed securities. These bonds typically track the yield on the U.S. 10-year Treasury.

Tucker said if the 10-year Treasury yield remains under 1 percent, the secondary market for mortgages stays healthy and the backlog of applications gets processed, it is possible mortgage rates will drop again to historic lows.

“Then, you would start to expect to see mortgage lenders feel the need to compete and undercut each other and offer those really low rates to borrowers,” he said.

However, Tucker said it’s hard to predict what will happen as the world economy is changing rapidly as coronavirus spreads.

Potential homebuyers, who have kept their jobs through the pandemic, might be waiting for prices to drop. But, it isn’t clear if San Diego prices will drop significantly. So, timing a market downturn at the same time as mortgage rates fall could be difficult.

Matthew Shaver, a San Diego senior mortgage consultant with Finance of America, said the changes in rates have happened so quickly he doubts buyers could keep up.

“Rates changed so quickly that people don’t know,” he said. “They don’t get daily reports. Media will get reports at the end of a week that says rates are at an all-time low. But, two days later they have actually gone up 1 percent.”

Shaver says he is processing 33 loans at the moment but only five are for purchases and the rest are for refinances. He said he didn’t notice any change in purchase applications in the past few weeks as rates changed.

A report released Thursday by LendingTree said San Diego had the eighth largest jump in refinances in the nation out of the 50 largest cities.

The San Diego metropolitan area saw a 360 percent annual increase in refinance applications in the week ending March 5.

The Federal Reserve has said it plans to buy unlimited amounts of mortgage bonds, which is expected to calm some investor fears.

Mark Goldman, a San Diego real estate analyst and loan officer with C2 Financial Group, said closing a loan can be stressful for a lender in today’s environment.

He said lenders must verify employment, but if the person is laid off after locking in a new loan, it gets canceled.

Goldman said another concern is that mortgage servicers, companies that collect monthly mortgage payments, still have to pay investors even if borrowers are granted forbearance on loans. The Mortgage Bankers Association has written a letter, according to CNBC, to the Federal Reserve chairman requesting relief for servicers who could go bankrupt if too many Americans aren’t making payments.

Article by PHILLIP MOLNAR

MARCH 31, 2020

  

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Don’t expect interest rates on 30-year mortgages to fall below 3%, says Quicken Loans CEO Jay Farner

    ‘If I were a betting man, I’d say there’s a higher probability rates will rise in the next few weeks,’ the CEO of the country’s largest mortgage lender told MarketWatch.  

Quicken Loans CEO Jay Farner believes that certainty regarding the coronavirus outbreak — whether it’s good or bad — will cause mortgage rates to move back up.

The past few years have been a roller-coaster ride for the mortgage industry, as interest rates have seesawed up and down.

Mortgage rates hit an all-time low this week in the U.S., with the average rate of the 30-year fixed-rate mortgage dropping to a staggering 3.29% according to Freddie Mac, eclipsing the previous low set back in 2012. Just a year ago, though, mortgage rates were hovering in the mid-4% range after almost touching 5% at the end of 2018.

With the ups and downs of mortgage rates have come booms in refinancing activity. This week, Quicken Loans reported the largest single-day volume of mortgage applications in the company’s history.

Quicken Loans is in an enviable position to profit off the latest boom in refinance activity, caused this time by the coronavirus outbreak. Since launching its Rocket Mortgage technology in 2015, the company has focused much of its energy in digitizing the loan process, sparking a trend across the industry. Today, 98% of all home loans originated by Quicken utilize Rocket Mortgage technology at some point in the process, helping the company become the largest mortgage lender in the country back in 2018.

MarketWatch spoke with Quicken Loans CEO Jay Farner to get his perspective on where interest rates are headed now that they have hit fresh lows and what the future holds for the mortgage industry. The following interview was edited for clarity and length.

MarketWatch: What is your take on the situation with mortgage rates right now? Where do you see them headed?

Jay Farner: As you probably know, the 10 year Treasury BX:TMUBMUSD10Y , at least last I checked this morning, has remained under 1%, which is a record low. That’s had the same effect on mortgage-backed securities. So 30-year mortgage rates have dropped quite a bit to the low-to-mid 3% range on a 30-year fixed-rate, and we’re now below 3% on a 15-year fixed. So, I’d say for the vast majority of Americans, they’re now in a position where they can save money by refinancing. So they should be doing something.

Interestingly, one of the things we’re talking a lot about is people moving from a 30-year to a lower term, a 20-year or 15-year, because rates are so low, they can get a payment today at a 15-year that is similar to a payment they would have made four or five years ago on 30-year when rates were in the fives, yet they could pay their home off in 15 years for far less interest.

MW: How low do you think mortgage rates will go?

Farner: There’s a supply and demand issue here. We are very fortunate we’ve been spending a lot of money for years investing in technology. We had hired over 1,000 people in the last 12 months because of the normal growth pattern we had set, so we’re taking this volume on nicely. But the capacity of the industry is getting filled up very, very quickly. So you’ll see some reduction in [interest] rates, but probably not at the same pace because lenders are taking on additional costs to be able to handle this additional demand. So they won’t be able to keep up with the 10-year Treasury.

‘Bad or good news, certainty about what’s going to happen I believe will cause interest rates to rise.’

I don’t see a 30-year fixed rate mortgage below 3%. I think we were seeing a lot of uncertainty, and that creates volatility in the market, which is causing the drop in the 10-year Treasury and mortgage rates. Bad or good news, certainty about what’s going to happen I believe will cause interest rates to rise. Right now, we have a complete lack of certainty, and so that’s why we’re seeing this. Even if they come out and say maybe the coronavirus will be a little bit worse than we thought that would bring certainty. If it makes sense, you can save money, you gotta lock your interest rates. Take advantage of the savings. And if I were a betting man, I’d say there’s a higher probability rates will rise in the next few weeks.

Read more:What the Fed’s surprise interest rate cut means for mortgage rates

MW: How does the situation with low mortgage rates today compare to back in 2012 when rates hit an all-time low?

Farner: You’ve got a particular incident that is creating uncertainty, but the underlying fundamentals are very, very strong. And so the minute some level of certainty occurs around the health of our country, all those other fundamentals will kick back in. And so you’ll see things return to whatever normal might be, whereas in 2012 there were a lot of questions about the fundamental components of our economy. And so that created a longer runway of lower interest rates than we might experience here.

MW: After Quicken Loans introduced Rocket Mortgage in 2015, with the promise to expedite the closing process by two weeks, it pushed other lenders to ramp up their efforts to digitize and speed up mortgage originations. What do you see as the next big trend on the horizon when it comes to improving the user experience for mortgage borrowers?

Farner: The mortgage is one aspect of a broader experience; it’s part of owning a home. Whether you’re buying one or whether you already own one, integrating the other things that matter — in maintaining your asset properly and being aware of what you should or shouldn’t be doing from a financial perspective around that asset — that’s important.

It shouldn’t just be, “Hey, I heard rates dropped, I refinance my house, I’m done.” No, you should be aware of what’s happening in your neighborhood. You should be aware of the equity that you’re building in your property. You should be aware of the trends in interest rates, and you should leverage all that data. We should be able to present that to you where you can be really informed about the ownership of your home all the time.

Your largest investment is your home, so why not more visibility into how that asset’s forming and more suggestions to improve that? You’re going to see people bring more value to consumers that way. That’s what we’re focused on.

Yesterday, we wrote nearly 7,000 mortgage applications in one day. It’s great that we’re helping all those people. I bet if we were to peel back the onion, there would be thousands of people in there that could have saved money two years ago that didn’t. And they missed out on thousands of dollars of savings because they just weren’t managing that asset on a frequent basis. And I think that needs to change.

MW: The Consumer Financial Protection Bureau has suggested that it may no longer require a specific debt-to-income ratio for mortgages to be eligible for purchase by Fannie Mae US:FNMA and Freddie Mac US:FMCC as part of an overhaul of rules set up in the wake of the 2008 financial crisis. Many lenders have said they will continue to use the ratio when underwriting loans, and Fitch Ratings raised concerns that the change could lead to riskier loans. What’s your take on this?

Farner: I’m not sure debt to income is the right thing to look at. I think it’s a good ratio, an important ratio, but what we need to start thinking about is how we look at income.

‘I get concerned that there are great people out there who should be owning homes that won’t be able to.’

Many of the guidelines still address income the way that it was generated 20, 30, 50 years ago. But the economy is changing. There are people who have real income, but it doesn’t come in those forms. They can afford a home, but according to the guidelines, they’re not able to right now.

We did a partnership not too long with Airbnb. There are consumers who purchase a home with the full intent that a bedroom or cottage that’s located on the property is going to be a full-time rental using Airbnb. Following standard guidelines it would be years before you could maybe consider that, or in some cases you could never consider that income. So we worked with [Fannie Mae] to create a program that allowed us to use that income because it was real income and we could tell through historical data that the client was going to have no problem renting that bedroom out for years to come.

So I think that’s where we should put our focus. There’s so many self-employed people, there are so many people who are contractors. And if we’re not solving for that, and allowing the programs to use that income, I get concerned that there are great people out there who should be owning homes that won’t be able to.

 

 

 

 

 

 

 

 

 

 

 

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Buying a Home Early Can Significantly Increase Future Wealth

According to an Urban Institute study, homeowners who purchase a house before age 35 are better prepared for retirement at age 60.  The good news is, our younger generations are strong believers in homeownership.

 

According to a Freddie Mac survey, “The dream of homeownership is alive and well within “Generation Z,” the demographic cohort following Millennials.  Our survey…finds that Gen Z views homeownership as an important goal. They estimate that they will attain this goal by the time they turn 30 years old, three years younger than the current median homebuying age (33).”

 

If these aspiring homeowners purchase at an early age, the Urban Institute study shows the impact it can have.  Based on this data, those who purchased their first homes when they were younger than 25 had an average of $10,000 left on their mortgage at age 60. The 50% of buyers who purchased in their mid-20s and early-30s had close to $50,000 left, but traditionally purchased more expensive homes.

 

 

 

 Although the vast majority of Gen Zers want to own a home and are somewhat confident in their future, “In terms of financial awareness, 65% of Gen Z respondents report that they are not confident in their knowledge of the mortgage process.”

Bottom Line

As the numbers show, you’re not alone. If you want to buy this year but you’re not sure where to start the process, let’s get together to help you understand the best steps to take from here.

 

 

 

Article by Hope Leitner, Real Estate Agent

 

 

 

 

 

 

 

 

 

 

 

 

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Mortgage rates have jumped this week — but could they one day fall to zero?

Marketwatch Published: Sept 12, 2019 11:01 a.m. ET

President Trump has called for negative interest rates — but that wouldn’t necessarily be a boon for housing

It got marginally more expensive to buy a home this week thanks to a rise in mortgage rates.

Mortgage rates rose on a weekly basis, even as President Trump called for the Federal Reserve to take its target interest rates negative.

The 30-year fixed-rate mortgage averaged 3.56% during the week ending Sept. 12, rising 7 basis points from the previous week, Freddie Mac FMCC, +4.27% reported Thursday.

The 15-year fixed-rate mortgage jumped 9 basis points to an average of 3.09%, according to Freddie Mac. The 5/1 adjustable-rate mortgage averaged 3.36%, up 6 basis points.

Mortgage rates roughly track the direction of the 10-year Treasury note TMUBMUSD10Y, +2.14% . The yield on the 10-year note has generally fallen since mid-August.

Low rates have provided a lifeline to the housing market throughout the last few months, as it has helped to ease affordability concerns among buyers. Mortgage applications for home purchases are up 9% from a year ago, according to the Mortgage Bankers Association.

“While there has been a material weakness in manufacturing and consistent trade uncertainty, so far, the American consumer has proved to be resilient with solid home-purchase demand,” Freddie Mac said Thursday.

This week’s uptick in mortgage rates represents only the 10th instance in which rates have increased on a week-over-week basis this year. And increases could continue to prove to be a rarity in the weeks and months to come, based on the Federal Reserve’s decision-making.

The Federal Reserve is still expected to slash the benchmark interest rate by 25 basis points at the end of the month, despite signs of a pickup in inflation. Some analysts are now predicting that further interest-rate cuts could come down the pike, driven by concerns tied to trade and the global economy.

Nevertheless, President Trump continued his attacks on the central bank — becoming the first U.S. president to say he welcomes interest rates below zero.

The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term. We have the great currency, power, and balance sheet…..

Of course, Trump likely was not talking about mortgage rates specifically when he made these comments. But what would happen to mortgage rates if the country’s benchmark interest rate dropped below zero?

Denmark provides us with a clue. The Scandinavian country’s Jyske Bank began offering a 10-year fixed-rate mortgage at negative 0.5% last month. Another bank, Nordea Bank, meanwhile, has offered Danish home buyers a 20-year fixed-rate mortgage that charges no interest.

Borrowers still make monthly payments when mortgage rates turn negative — the interest rate merely reduces the principal they owe the lender.

But a negative-rate environment wouldn’t be great for the U.S. housing market. For starters, it could drive people toward riskier methods of saving, since bank deposit rates would also be negative in such a scenario. Lenders would become stingier with the loans they offer, as it would be costing them money to make loans.

Home prices would also be expected to go up in such a low-rate environment. That’s what’s happened in Denmark. Given that many would-be home buyers are already priced out of the market today, a further increase in prices would aggravate that situation, no matter how inexpensive loan repayment became.

Even if the Fed does at some point push its benchmark rate into the red, it would be a while before such a low rate showed up in the mortgage market. It took seven years in Denmark.

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DO’S & DON’TS FOR NEW HOMEBUYERS

DO’s

DO create a file and keep copies of all your important financial documents as you receive them—check stubs, W-2s, tax returns, bank and investment account statements, rental agreements, etc. Do have them ready in case New American Funding needs updated documentation for your file.

DO wait to buy a new car, boat, or appliance until after your loan has funded.

DO look for a homeowner’s insurance policy for your new home. Do consult with the insurer of your current home, your auto insurance agent, and others to get quotes.  Do give the agent’s name and phone number  to your escrow officer.

DO have any donors give you money as soon as possible, if part of your down payment is a gift.  Do  be sure you understand the necessary steps and documentation for gifts; and don’t forget to follow all of them.

DO expect to receive calls and correspondence from at least three different companies during the course of your escrow:

Each of them has a different role to play in making sure your beautiful new home is ready for you to move into on time and on the terms you expect.

DON’Ts

DON’T keep cash in a safe or in an overseas account if you plan to use these funds for your down payment. Do talk with us about how and when to get the money into your U.S. bank account.

DON’T change jobs. If you have to change jobs, consult ahead of time with New  American  Funding.  Your loan cannot fund unless you are on the job we have verified for you.

DON’T make large deposits to your bank account unless you have to. Do save the documentation which shows where the money came from.

DON’T apply for new credit or give your personal information to anyone else who might run your credit report. Credit inquiries may hurt your score, and will have to be explained to the underwriter.

DON’T make new purchases with your existing credit cards. The underwriter may require a back-up credit report in a long escrow; and you could lose your approval. If you must make a major purchase, do call us so we can go over the impact on your ratios.

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