Los Angeles Mortgage Rates Report: January 21, 2009

Shopping for mortgage rates might have become easier but shopping for a mortgage is still quite difficult. Did you know that half of the loan applications taken last month did NOT result in a funded loan?  The long desired 4.5% mortgage rate is hard to get.  We’ve been there twice and you received a 4.5% mortgage if you:

1- Have impeccable credit

2- Have lots of equity (many borrowers were surprised at how foreclosures stole their equity)

3- Have plenty of documented income and were prudent in your use of debt.

4- Only refinanced the loan amount you used to purchase the property (you didn’t extract any cash out from a previous refinance)

5- Dealt with an originator who understood that mortgage rates were VERY volatile, gathered your information, picked a lender who wasn’t swamped with loans, and executed a rate lock at the appropriate time.

Have you seen what happened to mortgage rates this past week? They shot up from the mid 4’s to over 5%; that’s a half-percentage point rise in eight days.  The mortgage bonds market is skittish about our new President.  His Economic Recovery Plan relies on huge government borrowing and that is inflationary.

I have no comment about his plan; that’s far above my paygrade.  I do, however, think this massive government borrowing will drive rates into the 6’s within 12 months.  Still, there should be a pinprick of light through this dark cloud (in the form of a low mortgage rate)

Listen to this 3 minute podcast to find out when we should see that light.