Thread by @AdvisorJohn

A better solution doesn't exist, but here is a short 🧵on why looking at "Average Mortgage Rates" can be misleading in today's world.

#HomeBuyers or wanna-be #HomeSellers - pay close attention! Don't get discouraged running payments on your computer...talk to a professional!

https://twitter.com/NewsLambert/status/1656327957483343873

Conventional Loans are tough to price out these days. The #FHFA has a complicated pricing grid that requires points (upfront $$ - one point = 1% of your loan amount in a cash fee) to be collected based on certain loan parameters, LTV, Credit Score, etc
singlefamily.fanniemae.com/media/9391/dis…

These fees are historically absorbed in modestly higher rates. However, the mortgage bond market is not trading well these days so the profit in higher rates to absorb those fees doesn't exist. As a result, "Zero Point" loans can be quite high!

To further complicate matters, certain borrowers (income limits, first-time buyers) can have those fees waived.

Let's see where rates are today using one of the top correspondent lenders' pricing. I have a two-point profit margin which is lean, but typical in today's market.

If you were a First Time Homebuyer meeting area income limits, your rate would be:

6.25% with Zero Points or
5.625% with 1.25 Points

Credit Score, Down Payment, or Property Type doesn't matter! All loan adjustments are waived. DC Income limits are $168k! Baltimore MSA at $116k.

What if you make too much or you've owned a home in the past three years?

With 20% down and a credit score of 740, your rate would be:

6.625% Zero Points or
6.125% with One Point

If your credit score was > 780, your rate would drop .125%.

What if you were purchasing a condo. That same 740 borrower with 20% down would get:

7.125% Zero Points or
6.50% with one point

If you were putting down just 5%, your rate would improve by .125%.

As you can see, here we have three scenarios for a 740 borrower which yielded rates ranging from 6.25% up to 7.125% with no points. Or, 5.625% up to 6.50% with a rate buydown.

I guess we can say "The average is 6.50%" but as you can see, that can be wildly incorrect for you!

The point I'm trying to make here is lending is now complicated. Too many people use online resources and are misguided in many ways. Rates can be much better or worse than you think. You will only know by calling a local, trusted lender!

#RealEstate #Mortgage #Rates