Mortgage spread to Treasury

[Jurgis]

Thanks.

[CorpRaider]

Thanks for the head's up.  I've been waiting for that.

[Spekulatius]

If anyone gets 30-year-fixed at below 3% with no points, no fees, let me know where/when/how you got it. Thanks. 8)

 

I am pretty sure you can get this. I got 3 3/8% no points, very low fees (~400-500$) pre Covid in February for a 30 year conforming and I am fairly certain, I can get 3% now.

 

Try Polymortgage.com.

 

FWIW, the spreads for 30 year mortgages over the 10 year treasuries  are still high historically. I think there is room for mortgage rates to fall, even if treasuries just stay where they are. I am hoping for 2.75% rates for a 30 year conforming with no /low out of pocket.

[TwoCitiesCapital]

If anyone gets 30-year-fixed at below 3% with no points, no fees, let me know where/when/how you got it. Thanks. 8)

 

I am pretty sure you can get this. I got 3 3/8% no points, very low fees (~400-500$) pre Covid in February for a 30 year conforming and I am fairly certain, I can get 3% now.

 

Try Polymortgage.com.

 

FWIW, the spreads for 30 year mortgages over the 10 year treasuries  are still high historically. I think there is room for mortgage rates to fall, even if treasuries just stay where they are. I am hoping for 2.75% rates for a 30 year conforming with no /low out of pocket.

 

That's the rate I got, but not sure if it'll still be available now that Fannie/Freddie have announced that they're adding the other 0.50%.

 

[Jurgis]

If anyone gets 30-year-fixed at below 3% with no points, no fees, let me know where/when/how you got it. Thanks. 8)

 

I am pretty sure you can get this. I got 3 3/8% no points, very low fees (~400-500$) pre Covid in February for a 30 year conforming and I am fairly certain, I can get 3% now.

 

Try Polymortgage.com.

 

FWIW, the spreads for 30 year mortgages over the 10 year treasuries  are still high historically. I think there is room for mortgage rates to fall, even if treasuries just stay where they are. I am hoping for 2.75% rates for a 30 year conforming with no /low out of pocket.

 

That's the rate I got, but not sure if it'll still be available now that Fannie/Freddie have announced that they're adding the other 0.50%.

 

Right. I may have missed the window.

[Jurgis]

My mortgage person told me that they locked me 2.75%.

[Spekulatius]

My mortgage person told me that they locked me 2.75%.

 

Same rate here, so I am getting started as well. No closing costs supposedly but from prior experience there always seem to be a few hundred $ in incidentals effectively.

 

I closed my last refinance with the same broker early this year ( just before Covid hit) in a bit more than a week. This time will take longer, since they have enormous volume apparently.

 

 

[Mephistopheles]

Jurg and Spek, congrats on the 2.75%.

 

 

I am looking to purchase a new home, first time buyer, so would like some advice on how I can obtain the lowest rate possible.

 

One question I have is - If I have a bunch of cc debt built up to take advantage of 0% intro rate, would it be wise to pay it all off before I start looking? The debt has pushed my FICO score down below 800, so that will hurt my chances right?

 

What else can I do? Should I take out a bunch of cash from my investment account and deposit into my checking out to make it look like I am rich?

[LC]

They don't care about where your cash is, but your credit utilization does impact your FICO score.

Although over 740 I think you are usually getting the best rate anyways.

 

Here is the basic rundown:

 

Debt to income is the primary driver of how much you are approved for

 

FICO score is primary driver on your rate

 

Amount of money down is primary driver of your financing structure (which indirectly impacts rates, e.g. if you take a conventional + jumbo you will usually pay a higher rate for the jumbo portion)

 

Happy hunting!

[Mephistopheles]

Thank you LC!

[Spekulatius]

Jurg and Spek, congrats on the 2.75%.

 

 

I am looking to purchase a new home, first time buyer, so would like some advice on how I can obtain the lowest rate possible.

 

One question I have is - If I have a bunch of cc debt built up to take advantage of 0% intro rate, would it be wise to pay it all off before I start looking? The debt has pushed my FICO score down below 800, so that will hurt my chances right?

 

What else can I do? Should I take out a bunch of cash from my investment account and deposit into my checking out to make it look like I am rich?

 

I think a good mortgage broker will be helpful to get a good rate. Mortgage brokers typically are a much better source than banks.

 

I believe the FICO cutoff for the best rates is  at 760 or 770. Yes paying down CC debt may help, but keep in mind that there is a bit of a lag between eliminating balances and the FICO moving up.

 

Moving funds from an investment into a checking account won’t accomplish anything. The lender just wants to see a cash balance somewhere that is high enough to advance the closing balance (which is substantial even with a no cost refinance)

 

[Gregmal]

Jurg and Spek, congrats on the 2.75%.

 

 

I am looking to purchase a new home, first time buyer, so would like some advice on how I can obtain the lowest rate possible.

 

One question I have is - If I have a bunch of cc debt built up to take advantage of 0% intro rate, would it be wise to pay it all off before I start looking? The debt has pushed my FICO score down below 800, so that will hurt my chances right?

 

What else can I do? Should I take out a bunch of cash from my investment account and deposit into my checking out to make it look like I am rich?

 

Depends a bit on what you are trying to accomplish...for instance;

 

Do you want to buy as much house as possible, or are you looking for a starter home? Why is this relevant? Because having credit card debt scattered(ie 10 different accounts) vs consolidating it can effect your buying power. Also the type of debt. A car payment is cancer if you want to max out the amount of house you can buy. If you have a $600 car payment with $15k remaining, you are better off temporarily paying it off with a balance transfer where your minimum monthly payment will only be $200 or so. Stuff like that. Basically you want the monthly figure to be as low as possible, even if it means having to move things around. I was two years out of college and self employed, so for a number of reasons(add in trying to do this in 2012) my $900 a month car payment basically wiped out $150k of home. I had to buyout the lease, then buy a $5k clunker(they will still use your old car lease number unless you can show you own another vehicle) only to then go buy another Lexus two days after closing. Pain in the rear. Generally though, credit card debt doesnt mean much, only the monthly minimum payment, but fixed installment payments, cars, student loans, etc. are toxic.

 

I am unsure if they still have first time homebuyer programs, but if you are looking at a starter home, keep in mind that eventually you'll want to buy a bigger home and it may not be a bad idea to find something with a vibrant future as a rental. If you can get in using a 3% down type of thing(with rates this low, ignore the PMI as its not really a big deal) you have your name on the title of an awesome asset several years down the line and some optionality. Otherwise, an investment property will cost you 20% down. Maaaaybe, someone will underwrite one for 15%, but to get in to one young, and at 3%...a huge opportunity if you can pull it off.

 

Also challenge the fees. Application fee, origination fee, etc...all total bullshit. My guy told me that they have them on there because people pay them without asking. If you ask they almost always remove them. The application fee especially is really just collateral in the event you dont close.

 

Anything above a 740 FICO doesnt really matter.

 

DO NOT pile a bunch of money into an account as they'll want a paper trail of any large deposits for the prior 6 months.

 

If you are buying the home you hope to live in and raise a family in for 20+ years...spare nothing, be sensible, but dont be a cheap wad or cut corners. Its going to be your home, not a primary investment. Buy what will fit you and the vision of what you want for your future life and family. Assuming its not going to be a rental, transaction fees for real estate suck and its a time consuming process, so make it a one and done.

[Mephistopheles]

Thank you Spek and Greg.

 

I'm glad my FICO score is likely fine. Greg, glad you mentioned getting rid of auto or student loans - I just so happened to pay my entire student loan off on my credit card because they waived the cc charge due to covid, so I have a whole bunch of points coming my way haha.

 

One more question. How much difference does a cosignor make in terms of debt/income ratio? My dad will be cosigning the loan with me, and his income is quite a bit higher, excellent credit, and his home is fully paid off, etc. Assuming I can't pay my mortgage, the cosignor is liable right? So in that case is it the same thing as having my own income vs. cosignors? Or does only your own personal income factor into the income ratio? My issue is that I am working part time for now, because I am looking to do freelancing contract work, and that's more sporadic. I have a large amount of liquid assets built up in addition to my part time income, hence I am comfortable buying a home with a sizeable mortgage.

[Gregmal]

I dont have much experience with cosginers but from doing a few JVs(if you will call them that) they typically either look at everyone equally, or focus on the primary borrower. Not sure that changes with a cosigner. Everyone on the total with have equal responsibility to make sure the mortgage is paid. If anything, just put your dad as an applicant as well, so everything is equally weighted.

 

Working freelance or 1099 is shitty. You can have a w2 job for a week and they take your income figure at face value for the debt to income ratio, but you can be self employed for 10 years and they still want 2-3 years of returns and average them out. Its gotten better, but putting your own food on the table still sucks when you apply for a mortgage. It was a nightmare when I applied. My numbers were like 15k, 60k, and 160k and I bitched the the lender "I managed a liquor store part time my last year of college, took a year off, and then started working 18 months ago...how the F is this reflective of future earnings?" but to no avail. They dont care. If you know any family or friends who own businesses, taking a w2 "job" as a "favor" for a couple months may be worth exploring.

[Mephistopheles]

I dont have much experience with cosginers but from doing a few JVs(if you will call them that) they typically either look at everyone equally, or focus on the primary borrower. Not sure that changes with a cosigner. Everyone on the total with have equal responsibility to make sure the mortgage is paid. If anything, just put your dad as an applicant as well, so everything is equally weighted.

 

Working freelance or 1099 is shitty. You can have a w2 job for a week and they take your income figure at face value for the debt to income ratio, but you can be self employed for 10 years and they still want 2-3 years of returns and average them out. Its gotten better, but putting your own food on the table still sucks when you apply for a mortgage. It was a nightmare when I applied. My numbers were like 15k, 60k, and 160k and I bitched the the lender "I managed a liquor store part time my last year of college, took a year off, and then started working 18 months ago...how the F is this reflective of future earnings?" but to no avail. They dont care. If you know any family or friends who own businesses, taking a w2 "job" as a "favor" for a couple months may be worth exploring.

 

Lol, that's interesting. Noted. I at least have my part time W2. Hopefully my dad's W2 helps make the difference. Thx for help, I will share what happens when I get my mortgage.

[BPCAP]

For my fellow posters who are also extremely debt-adverse to a degree that, on paper, doesn't look optimal or smart (i.e. the typical planner would look at me and say, why don't you at least have a mortgage-you're leaving carry on the table!):

 

Would you take out debt at any rate? I'm trying to talk myself into getting some debt via a mortgage that's about 2% (and falling) after tax benefits, and it's refundable, refinanceable, and NON-RECOURSE (because it's 'Merica!). Why not get as big a mortgage as possible?

 

The only reason I can think of is work. Meaning, the day I paid off my mortgage was the day I starting thinking more clearly and investing better (I'm a PM). I improved a real shortcoming in my game, which was Munger's concept of gumption. Will I be more anxious or timid because I have some debt, even though I know that it would lead to no reasonable bad consequence? 

 

Thanks for hearing me out on this optimization problem. Not a real problem, of course, in the big scheme of things. But on an anonymous board, it's easier to ask the things I'd be ashamed to ask people I know.

 

 

[thepupil]

Alaska, Arizona, Washington, Utah, Idaho, Minnesota, California, North Carolina, Connecticut, North Dakota, Texas and Oregon.

 

I assume a risk averse chap like you knows those are the non recourse states.

 

I am the exact opposite.

 

I maximize debt and minimize home equity in order to have the most liquidity. I feel more comfortable being short a mortgage and long investments and house than being long a house and much lower investments.

 

During the rona, I have incrementally de-levered from 97% to 90% LTV, 2% via some accelerated amortization of my 2nd lien that balloons in 4 years and the rest from fake Zestimate appreciation. Without going into too much detail, I have the ability to be much lower LTV but do not have enough money to pay off the house entirely at this stage of the game.

 

I am in the midst of my worst drawdown on a relative basis of my short investment career. I took out the 2nd mortgage  right before this. It has not been a good decision thus far and has been detractive to net worth. I still feel more comfortable with though.

 

people think I’m nuts. My home is financed like it’s 2005.

 

My advice is you do you. It’s not like the risk of investing with mortgage proceeds have decreased because rates went from 4% to 3% to maybe less.

[DooDiligence]

I think it depends on the individual / couple / family.

 

I'm a terrible equity investor who gets lucky on occasion.

 

I own my home & don't owe anyone a penny.

 

I sleep like a baby & wouldn't have it any other way.

[Jurgis]

I think it's a great time to buy multi-million dollar house with 80%+ mortgage.

But I won't do it.  ::)

 

I agree with what thepupil said: You do you.

[fareastwarriors]

 

During the rona, I have incrementally de-levered from 97% to 90% LTV, 2% via some accelerated amortization of my 2nd lien that balloons in 4 years and the rest from fake Zestimate appreciation.

 

 

What kind of mortgage? HELOC?

 

 

[Gregmal]

I'm with pupil on this one.

 

Only difference is that I was lucky to be able to buy the home I hope to live in and raise my family in for 20+ years by 25. This also happened to be shortly after the GFC. So I got in at a good time, put some sweat equity(plus like $200k) into my home, and did a cash out refi this past March to raise liquidity.

 

But I lever EVERYTHING. Cash is garbage. Even my $1200 snowblower...12 months no interest, then balance transfer to a 0 interest card. All day. Typically with home improvement projects or large expenses, I'll put down 1/3 in cash and finance the rest. Cars I lease off the top and then buy out into a 5-7 year loan depending on the rate.

 

I've got a few private placements in non public companies...75% funded with debt from the start. I semi regularly buy vintage sports cards and memorabilia(be careful, but if you are in the right neighborhood this is as good as art) always funded with promo credit card deals with no interest.

 

It's originally the Donald Trump strategy, but if one hates him, its easier called the Brookfield playbook. Get into good assets with as little upfront equity as possible and then let them do their thing. Only adjustment is go super hard on the leverage for depreciating, but life necessary assets, IE cars and whatnot. Its crazy to me when I hear folks paying cash for cars....what a waste.

 

The only * is to make sure you have liquidity earmarked for all this stuff. But if you can afford it to begin with, why pay up front?

[thepupil]

 

During the rona, I have incrementally de-levered from 97% to 90% LTV, 2% via some accelerated amortization of my 2nd lien that balloons in 4 years and the rest from fake Zestimate appreciation.

 

 

What kind of mortgage? HELOC?

 

No. HELOCs can be pulled at the wrong time from what I’ve read. I am less comfortable with debt like margin and HELOCs where a change in the bank/brokers policy can suddenly change the duration of your loan.

 

I got an 80-98% 15 year amortization 2nd mortgage that balloons in 5 years (now 4.25). Rate is 5.25% which increases my all in house rate from 3.125%(the rate on the jumbo first) to 3.5%; 98% at 3.5% seems quite borrower friendly. Because the proceeds were used to fund investments, the interest is deductible, but you have to make an election that classifies all your investment income as short term so it’s not generally favorable and is generally not deductible.

 

I’ve been marginally paying down the balloon a bit more aggressively so that 4 years from now it’s closer to 7% of net worth (assuming stagnation/no bonus) than 15% when it balloons ; I’m pretty confident I’ll just borrow again on similar terms and hopefully extract more out of the house given its appreciating at > expected rate and the loan will be less sognificant relative to liquid assets by then and be lower risk.

[TwoCitiesCapital]

For my fellow posters who are also extremely debt-adverse to a degree that, on paper, doesn't look optimal or smart (i.e. the typical planner would look at me and say, why don't you at least have a mortgage-you're leaving carry on the table!):

 

Would you take out debt at any rate? I'm trying to talk myself into getting some debt via a mortgage that's about 2% (and falling) after tax benefits, and it's refundable, refinanceable, and NON-RECOURSE (because it's 'Merica!). Why not get as big a mortgage as possible?

 

The only reason I can think of is work. Meaning, the day I paid off my mortgage was the day I starting thinking more clearly and investing better (I'm a PM). I improved a real shortcoming in my game, which was Munger's concept of gumption. Will I be more anxious or timid because I have some debt, even though I know that it would lead to no reasonable bad consequence? 

 

Thanks for hearing me out on this optimization problem. Not a real problem, of course, in the big scheme of things. But on an anonymous board, it's easier to ask the things I'd be ashamed to ask people I know.

 

I was/am very debt averse. As I get older, I become less so.

 

When it comes to a mortgage, I want to borrow as much as possible because rates are low, liquidity is valuable, and it's hard for me to get 30-year money any other way. A 2.75% mortgage rate is a low bar for performance IMO.

 

As mentioned above, I also finance large purchases with 0% credit cards and roll the balances with balance transfer offers and pay down over the next few years. This is definitely the MOST risky thing I do, but the balance is less than 15% of my net worth and the carry costs negligible.

 

Don't swing for the fences with the money. Easy singles and doubles will keep you out of trouble and still be optimal with your leverage. Maybe a mixture of high yield corporates, mortgage REITs, some EM debt, some preferred equity, and some cheaper blue chips. Should be able to yield more than your hurdle rate with less volatility than the S&P 500 and you have some principal growth opportunity as well.

[CorpRaider]

 

During the rona, I have incrementally de-levered from 97% to 90% LTV, 2% via some accelerated amortization of my 2nd lien that balloons in 4 years and the rest from fake Zestimate appreciation.

 

 

What kind of mortgage? HELOC?

 

No. HELOCs can be pulled at the wrong time from what I’ve read. I am less comfortable with debt like margin and HELOCs where a change in the bank/brokers policy can suddenly change the duration of your loan.

 

I got an 80-98% 15 year amortization 2nd mortgage that balloons in 5 years (now 4.25). Rate is 5.25% which increases my all in house rate from 3.125%(the rate on the jumbo first) to 3.5%; 98% at 3.5% seems quite borrower friendly. Because the proceeds were used to fund investments, the interest is deductible, but you have to make an election that classifies all your investment income as short term so it’s not generally favorable and is generally not deductible.

 

I’ve been marginally paying down the balloon a bit more aggressively so that 4 years from now it’s closer to 7% of net worth (assuming stagnation/no bonus) than 15% when it balloons ; I’m pretty confident I’ll just borrow again on similar terms and hopefully extract more out of the house given its appreciating at > expected rate and the loan will be less sognificant relative to liquid assets by then and be lower risk.

 

Some of my twitter dudes are saying you can get 10/1 ARM interest only loans now (maybe they are HNW private bank types, IDK).  I think I will probably just keep doing the 30 year fixed with the cheap/gov't subsidized interest rate option.  I still feel like mid 2's for a cash-out is what I want to see.  I should probably paint a couple of things before, since they act like the guy doing the $500 appraisal can actually add something to the valuation data....what a pain in the ass.

 

Unrelated: I'm pretty sure the NC anti-deficiency statute only applies to seller financing (i.e., not the normal situation where a bank.third-party funds the mortgage/DOT)

[Spekulatius]

re appraisal - I refinance with the same lender (no cash out ) and he is still relying on the initial appraisal from when I bought the house in 2018. There was no reappraisal needed for my last refinance, nor for my current one.

 

FWIW, my LTV is ~50%.