Now, this was probably one our most sobering podcasts. If you’re in contracts, going into contract, refinancing, or thinking about refinancing it’s reasonable to be wondering about how COVID-19 is going to impact this.
Currently, the fed rate is at zero. People have emailed us asking, “Hey, can I get some of that 0% interest rate?”
Unfortunately, the fed rate does not correlate with mortgage interest rates. The fed funds rate is the interest rate that banks can lend or borrow from each other. Mortgage rates, however, have to do with the supply and demand of the investor. Interest rates a month ago were hovering around 4% for a 30 year fixed, then around early March they dipped because coronavirus started causing the stock market and treasury to crash.
Generally, if you want to follow rates we suggest following the treasury, but even the treasury wasn’t correlating with mortgage rates. It was diving. Now, of course, the treasury has to stay low if we’re going to have low rates, but because the demand is so great, bank rates have shot up and some have said said for us to just stop sending people. We had certain banks suspending pricing after a couple of hours. A lot of the big banks seem to be putting a hiatus on some of the refinances, if not technically putting on hold.
We find that while rates are still very good, they’re not going to be as low as you think. This is primarily due to artificial reasons, which is that banks cannot keep up with the production right now. If they can sell a mortgage at 3.25% all day long, they have no motive to lower them to 3.125%, as long as the demand is strong and fills up their pipeline.
Keep in mind that we’re talking about conventional financing here. We’re still doing FHA loans and VA loans in that 2.8-2.9% range.
This is not a great time to jump on jumbo loans. A lot of the borrowers or the lenders are very hesitant. We’re seeing decent pricing for the very clean or what we call typical files for purchase or refi. But when you start changing product type and you start going above conforming loan limits and you’ve got credit that is a little bit lower than average, the pricing has just taken a huge hit.
Portfolio loans are getting killed right now because the investors on Wall Street are pulling out of those deals. Portfolio loans are basically nonstandard. If you don’t fit in a lovely little conforming box we call them non-QM or non-qualified loans. So, anything that is unique, rare, or unusual is either being suspended or the pricing is just ridiculous.
So even conventional loan, FHA, and VA guidelines are affected, particularly if you’re in the hospitality, travel, airline, or cruise business. If you work in one of these sectors it’s likely that the bank is going to be putting an extra layer of review on your loan. They’re going to be making sure that you are going to be staying employed.
Right now we want to be very careful in this environment. Even while working from home, we are still going to be working very very hard for you. We estimate 30-35 days for purchases and 45-60 days for refinances.
This is another reason why a broker is so important right now. We’re able to literally wade through the waters, picking the right banks for not only your situation but also for the economic landscape we’re in. A lot of those banks that are requiring 60 days or those banks that are putting pricing in suspension mode frequently, we’re just staying away from them.
Right now, appraisers still have to go out to your house. They have to drive over there and take pictures inside your home. We had a borrower ask an appraiser today to wear a mask and gloves when appraising the home. Expect everyone to take sanitation and personal protection very seriously.
In regards to title companies, we are hearing reports that they are probably going to defer almost all of the signings to mobile notaries who will also be wearing protective gear. Right now, they have to go to your home or meet you somewhere and have you sign these documents.
Appraisers and mobile notaries are going to be the unsung heroes in real estate. Be safe.
Right now, pricing is about as good as we think it could be in normal circumstances, with the exception of the banks needing to kind of let off their artificial price increases. If the banks can get through their volume, we’re hoping to see some of these artificial interest rate increases come down. The big question you’ve got to ask yourself is if are you are willing to wait and have the rates never come back down and potentially go up, or do you want to lock in for that safe fixed rate.
It’s a very individual thing, but it’s still a good time. For a lot of folks, they’re taking these rates where they are.
If you have any questions about this or if you have any questions you’d like us to answer on our podcast, you can email your questions to email@example.com or give us a call at (602) 535-2171. Be sure to ask us for a free quote on your next mortgage. We’ll personally work with you and help you through the whole process.
Thanks for listening and reading the Mortgage Brothers Show. Let us know if you have any questions you’d like us to answer on this podcast. You can email your questions to Tom@AZMortgageBrothers.com or Eddie@AZMortgageBrothers.com.
Be sure to ask us for a free quote on your next mortgage. We’ll personally work with you and help you through the whole process.
Signature Home Loans LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Signature Home Loans NMLS 1007154, NMLS #210917 and 1618695. Equal housing lender.BACK TO LIST