Rates
Well if you haven't head the news, here it is:
The US economy only produced and additional 18,000 jobs last month, and for May, that figure was revised down from around 50,000 down to 25,000.
Unemployment went from 9.2% to 9.3%
All I can say is OUCH!
This has casued the 10 year bond to fall from a high of 3.17 to 3.01 today, and the FNMA 4.0 coupon to jump by 72 BPS.
So what does this all mean to you....
Rates will continue to be at their 2011 lows, with FHA still entrenched at 4.25% (4.75 APR) and the 30 year conventional in the 4.375% (4.625 APR) mark.
Most lender are going to keep their rates a little higher over the weekend, just to see how things pan out. But based on these numbers and expected numbers for next week, we could, could see that 4.25% wall crumble even more, which means Govies could see the 4.00% mark.
Last week rate rose after Greece got the EU to figure out a bail out. But there was some grumblings this week that it just maybe a temporary band aid.
Also this week, Moody's dropped Portugal's rating down to junk. So the the EU is going to have to figure out what to do with Portugal. Depending upon how bad this country is, the EU may have to bail them out also, but the really question is, does the EU have the financial capability for bail Portugal out???
I think the next 2 weeks will be very volatile for rates, and if the 4.25% barrier can be broken, we could see very low 4's again! But it will take another round of pretty negative numbers to get back into the 3's again.
25 year loans
I have a lender that is going to be offering now 25 year fixed loans, and it give another options for people who may be retiring soon.
Let's look at the math.
On a $100,000 @ a 4.25% rate a 30 year loan PI = $491.00
on a $100,000 @ a 4.25% rate a 25 year loan PI = $541.00
So that is a $50/month more, BUT.......
$50 x 300 payments = $15,000
BUT you would save $491.00 X 60 payments = $29,460.00 by paying it off 5 years sooner.
Total savings would be 5 years and $14,460.00
So now we have 30, 25, 20, 15, 10 year loans! Fixed.
Lender Paid Mortgage Insurance
Lender Paid Mortgage Insurance is making a come back, what is this??
Well rather than paying monthly MI, the MI is rolled into the rate.
Pro: The monthly payment is significantly less, example:
$100,000 loan amount with MI, 30 year fixed, 4.375%:
PI= $497.81
MI=$ 95.83
Total = $593.64
$100,000 loan amount with LPMI, 30 year fixed, 4.75%
PI=$521.66
MI= $0
Total =$521.66
Savings of $71.98 per month.
Con: MI can potentially fall off after 24 months, IF the home has increased in equity by 25%. MI will usually automatically fall off after about 14-15 months. So with LPMI, you are paying a higher interst rate until you either sell or refi.
But still a good option out there for people who want lower payments!