Rates May be Falling, But Other Mortgage Costs Are Going Up
Mortgage rates have dropped significantly since October, reaching the lowest levels in 4 months. This is due to improvement in the bond market and changes in fees imposed by regulators.
Mortgage rates have been on a rollercoaster ride in recent months, but one thing that has remained constant is the impact of Loan Level Price Adjustments (LLPAs) on the cost of a mortgage. LLPAs are fees that are imposed by Fannie Mae and Freddie Mac, the two entities that back the majority of mortgages in the US. These fees are based on certain loan features, such as credit score, loan-to-value ratio, occupancy, and debt-to-income ratio.
Recently, regulators announced a change to these fees that will have a significant impact on borrowers. Starting May 1st, 2023, borrowers with lower credit scores will see a reduction in their LLPA fees, which means they will have to pay less in closing costs. This change applies to most loans in the US, but not all. For example, loans from the Federal Housing Administration or Veterans Affairs, or certain jumbo and specialty products are not affected.
So what does this mean for you? If you're planning to take out a mortgage in the near future, it's important to understand how these changes will affect the cost of your loan. If you have a lower credit score, you may be eligible for a better rate and lower closing costs thanks to the new LLPAs. However, it's important to remember that these changes won't take effect until May 1st, 2023, so many lenders will begin implementing these changes in March/April.
Mortgage Rates Change Daily
It's also worth noting that these changes to LLPAs are just one of many factors that can affect the cost of a mortgage. The bond market, economic conditions, and other regulatory changes can all play a role in determining mortgage rates. It's important to stay informed and work with a lender who can help you navigate the complexities of the mortgage process.
These changes to LLPAs announced by regulators are a positive development for borrowers with lower credit scores. It will make the cost of borrowing more affordable and accessible, which will help more people achieve their dream of homeownership. However, it's important to remember that these changes won't take effect until May 1st, 2023.
Get A Mortgage Rate Quote From Today's Market
Ultimately it remains unclear what direction mortgage rates will take in the near future but one thing is clear - right now is still a great time for prospective homeowners to lock in some favorable lending terms while they last!
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Lock / Float Advice
If I were considering financing / refinancing a home & it was closing in the timeframes listed below, I would...
Lock
< 15 Days
Float Cautiously
15-30 Days
Float
30 + Days
These are my professional opinions and not those of Homespire Mortgage Company. I formulate these opinions with the help of various experts in the real estate, mortgage, & finance communities. This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
Market Summary | TL;DR | Cliff Notes
According to Sam Khater, Chief Economist at Freddie Mac, declining inflation has led to a drop in mortgage rates this week. He stated that "rates are at their lowest level since September of last year, which is helping to increase both homebuyer demand and homebuilder sentiment." Khater added that the drop in rates is providing a much-needed boost to the housing market, but the lack of available homes remains a concern.
This week, there is a lot of information to keep track of. Thursday is a particularly busy day with jobless reports, GDP, Durable Goods orders, and New Home Sales data all being released. Friday wraps up the week with the Core PCE price index, which is an important inflation indicator for the Federal Reserve.
Mortgage rates and housing prices have improved again. If you are in the market for a mortgage loan, contact me today to help simplify your application & expedite your approval.
These are my professional opinions and not those of Homespire Mortgage Company. I formulate these opinions with the help of various experts in the real estate, mortgage, & finance communities. This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.