June 10, 2016
Mortgage rates dropped lower on Thursday, putting them at levels we haven’t seen in quite some time. Some market watchers are hailing this move as a “three year low”, but whatever you call it, conditions are right to but conventional mortgage loan best execution rates (depending on the lender) in line with the upper end of the FHA mortgage loan best execution range.
That’s on paper, mind you, and your results will vary depending on a variety of factors. But that on paper comparison between what’s offered by FHA lenders (best execution) and what’s offered by a small number of competitive conventional lenders is not a common thing, especially when those numbers start to look similar.
30-year fixed rate conventional mortgage rates are, by many reports, more commonly found at 3.625% best execution, while the more aggressive lenders are offering a best execution 3.5%. Compare that with the FHA range of rates between 3.25% and 3.5% and it’s easy to see why this trend is getting some attention.
These rates (all the ones listed here) are called “best execution” rates because they assume ideal conditions including outstanding FICO scores and other financial qualifications. The rates here are not available to all borrowers or from all lenders. Your experience may vary.
Locking and floating advice is mixed in the current rate environment. There are some who feel that when rates get this low it’s a good idea to take advantage of them before they slip away.
Others may, depending on circumstances, advise trying to float because there are some indications that the improvement isn’t quite done yet. Could lower rates be on the way? Will the FHA rate comfort zone we’re seeing now disappear in favor of either a new, lower rate or simply the bottom end of the current range?
That remains to be seen, but one thing is important to keep in mind; floating is never without risk. Any number of factors could add up in the coming days to put pressure on rates and push them higher. Borrowers need to asses how high rates might go before cutting their losses and committing to a mortgage rate lock with the lender.
Having that “ceiling” in mind is a very good way to try floating, especially if you have to do it over a weekend or a holiday. “Risk tolerance” a very important thing to keep in mind when deciding whether to lock or float.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:
http://www.fha.com/fha_loan_limits_widget
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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