Mortgage blog

Wholesale banks are still clogged with applications, so rates are still artificially high, hopefully now that the holidays are over ,turn times might get back to normal. My suggestion is to get you application & documents in now & wait for the rate you want.

Here is a great article in today's NYT that explains a piece of the credit crunch that most do not understand.

http://www.nytimes.com:80/2009/01/20/business/economy/20builders.html?emc=eta1

Why are rates artificially high?

A complex question that I will give a simple answer for.

This week, they are high because the wholesale banks have too much business! Yes that sounds stupid & it is. They have downsized like many companies in this crisis. Now an opportunity now exists that is actually a benefit for their shareholders & customers alike. So instead of restaffing , they raise the rates. We actually had one of our banks stop taking locks today!

By artificially raising the rate, they slow demand & make more profit. A win for the big bank, but what about you?

Call one of our mortgage professionals to find out how you can beat this practice.

Finally, the bailout may be coming to main street! Last week the Fed announced it will be purchasing mortgage backed securities (MBS).

I and many other thought the whole point of the Troubled asset relief program(TARP) was to buy them, but what do we know? The fact that they are finally buying them will definitely mean lower rates for you the consumer.

But for how long? Who knows. This economy has defied all traditional economic indicators, so I cannot predict what will happen with any certainty.

What I can predict though, is already happening, we have 30 year rates in the mid 4% for the first time in my 27 years in lending.

If your rate is in the 5's or higher, act now. Don't be the one who waited too long. 

for example, I had a customer who had just closed a $160000 loan @ 5.875%, he didn't think 4.5% was worth the refinance costs.

Lets do some math. 5.875 - 4.5 = 1.375

1.375% x $160000 = $2200. the first year difference in interest due.

 $2200/12 months = 183.33 per month interest savings. An  approximately $48800 savings over the life of the loan.

Try it with your own mortgage details.