Retail Home Sales come in as expected. Colorado Home Mortgage rates seem to be improving
Retail Home Sales data came out today and so far the information has not surprised anyone. Retail Home sales are definitely at a low point and the market continues to responded as expected. Colorado Home Mortgage rates have improved for the third straight day. Now it is up to the lenders to release Colorado Home Mortgage rates that fall more in line with what the market is showing. I have had a lot of questions asking me how the market prices out Colorado Home Mortgage loans, versus what the borrower actually pays for their Colorado Home Mortgage. There are two Colorado Home Mortgage markets to obtain a loan from, Retail markets and Wholesale markets. Both these markets work the same as it relates to the type of Colorado Home Mortgage loan, the only difference is availability and price. Retail organizations like Wells Fargo direct, First Horizon, and any other local banking institution only offer portfolios tied to their individual lending criteria. They will also charge a premium of 2% before any origination cost are added. This premium is added to the 5.5% coupon rate found on the Mortgage Backed Securities market. So in short if the 5.5% coupon market is selling at 100.00, which represents the coupons original price. When this occurs the coupon is said to be selling at PAR. Your Colorado Home Mortgage Rate would be 5.5% with no one in the business making any premium unless origination and other charges are added to the loan. Regardless of what origination or fees are charged the retail side of the house will always charge a premium that comes from the rate. In order to get the 5.5% coupon bond at 102.00 retailers will charge a higher rate to obtain the 2% premium Retail shops price in to sell their Colorado Home Mortgage rate. Retailers will offer you a Colorado Home Mortgage rate around 6.25% or 6.5% to obtain this premium. In the Whole sale side (which I am a part of:-)) you will get the rates directly from the Mortgage Backed Securities market. The Lender offering the Mortgage Backed Security will still put a premium on these Colorado Home mortgage rate, but instead of 2% it is 1%. This means that the 5.5% coupon bond will price at 101.00 which means we can offer you a better Colorado Home Mortgage rate. Normally about 5.75%, again based on today’s numbers. This is a full .5% better then retail.
So the real question here is why are we not seeing all of the savings we should be seeing in the market? Well the market has just come off of inflationary reports and inflation is very bad news for Colorado Home Mortgage rates. These numbers did come in as expected, but lenders will typically wait a few days to make sure that the inflation risk has jumped out of the Colorado Home Mortgage market. Instead of pricing in 1% which is typical they currently have priced in about 1.25%. This should find its way out of the market the next few days. Retail shops have it even worse with about 2.25% currently priced in. We will continue have a FLOAT recommendation for Colorado Home Mortgage Rates. All signs show that rates are getting better and we should continue to hold out until the market tells us something different. As usual call me with any of your Colorado Home Mortgage questions. Good Luck and Stay tuned
Tags: Colorado Home Mortgage, Rates
April 22nd, 2008 at 9:57 am
Nice writing style. Looking forward to reading more from you.
Chris Moran