Mortgages Rates are Trying to Climb Back Down – But it is a Slow Process.

Well, it has been an exciting few weeks. Five weeks ago the yield on the 10 year
bond was 2.85% and today it ended at 3.79%. This has resulted in interest rates
being a lot higher than 2 weeks ago. If you get an offer on one of your
listings, make sure you have the Max interest rate at the appropriate level
because there have been cases of buyers backing out of deals due to the higher
rates.

In the past two weeks, rates have increased by about 1% but then have rallied a
bit in the past 2 days (yield has gone from 3.99% to 3.79%).

Let’s put this in Perspective:

It is all a matter of perspective. I am speaking of interest rates. For those of
us close to the pulse of the market (probably too close) it is easy to think
that the sky is falling when we have rate increases. Especially during times as
we have experienced in the past couple of weeks. In the past two weeks, rates
have increased about 1% after being below 5% for about a month. A very nice run
indeed. However, unless someone was in the market for a refinance or a purchase
loan, most people just starting to look at rates really have no idea that they
just went up. While I may think today’s rates are high, due to my experience of
the past month, to the new client who is looking at it in a much different
perspective, they sound pretty good.

An illustration:

Rates were at 4.50% on May 15th. Two days ago they were at 5.875% Today, they
are at 5.375%.

In the client’s eyes who has not been watching rates, in June of 2006 rates were
at 6.375%, June of 2007 they were 6.625% and in June of 2008 they were 5.875%.
So a rate of 5.375% today, sounds pretty good.

All of this reminds us not to get caught up in the moment with our own bias.
Present the current market situation in the best light that we can without
inserting any negative perspectives.

We make the best of the current market situations that we can for our clients at
the time it is present to us. That being said:

RATES ARE FANTASTIC! NEAR RECORD LOWS. DON’T LET THEM GET AWAY!

The one constant about rates is that they will change and we have absolutely no
control over them. Grab one and don’t look back.

Have a great weekend.

These are interesting times …….

I have been asked ‘Who/What is Mortgage California?’. We are a subsidiary of PHH
Corporation; the 5th largest mortgage originator in the US. We are originating
$2.5 BILLION in mortgage loans every month, so we are big, stable and we are
good at what we do. Unlike some other lenders we have never run out of funds to
fund loans.

Remember that FHA loans are now available up to $729,750 with a down payment of
only 3.5% (the lowest downpayment available in the market). Keep this in mind as
Open House visitors ask about possibilities.

I am firmly convinced that 3 years from now we will look back and “What a Great
Opportunity 2009 was. Interest rates were low and property values were very
affordable.”

Please remember that I am available if you get an offer on one of your listings
that you would like me to review the ‘mortgage approval’ letter that comes with
it. Some lenders have closed their doors and the letters out there are truly not
worth the paper they are written on. This review is another step to protect your
sellers from having the property tied up in an offer that has little chance of
closing.

These quoted rates are for Full Doc Purchase transactions with either no prepay
penalties or a 1 year penalty and good credit. Rate ranges are shown when LTV
and/or credit scores and/or loan size affects the rates offered; I hope this
makes sense bacause rates at 900K are different form 700K and also from1.1M:

• 80% to $2M – 5.875% at no points 10/1
• 10 year (then ARM) Jumbo- 5.5% at 1.0 Point
• 5 year (then ARM) Interest Only Jumbo-5.5 % at no points
• 30 year Jumbo fixed 6.5 to 6.875% at 1. point
• 30 year Conforming-Jumbo fixed 5.75% at 1 point (Up to $729,750)
• 30 year Conforming fixed 5.375% at 1 point (Up to $417,000)
• 30 year Conforming fixed 5.75% at No points (Up to $417,000)

As always, email tom@afirealestate.com to continue the discussion.  We look forward to hearing from you.