October 25th, 2021 11:21 AM by Richard Sardella MLO.100007700/NMLS 233568
SOLD? Steps that lead to celebrating the moments of your life
“Pay me.” That’s what millions of home sellers who seemingly miraculously sold their homes in just a few days for thousands of dollars over the asking price are saying. But getting that large amount of money into your bank account is not as easy as an old Star Trek episode, where something or someone is suddenly “beamed up.”
Buying a property is a complex transaction. That means turning a mortgage loan on one end into cold, hard cash on the other is replete with steps designed to protect both buyer and seller. So if your Realtor doesn’t hand you a timeline, here is pretty much what to expect.
First, buyers usually make an up-front payment—known as earnest money but translates to “skin in the game” hard cash—of between 1% to 5% of the purchase price of the home within three days of an offer. It’s at that point the seller takes the property off the market. And this first payment will be put toward the total cost of the home. But not so fast. It won’t get you to Cabo for a week of fun and frolic quite yet. It’s held by a third party—such as an escrow company, a real estate firm, or a lawyer—until closing day. Lots can happen in the interim. So if anything goes wrong from the contract to the inspection, the neutral party can fairly distribute the earnest money—usually back to the buyers. If buyers cancel the sale for no legitimate reason or miss key dates in the contract, the seller may have the right to keep the money.
So what about the buyers’ down payment? Why can’t you get that right away? Because it’s not yours. Yet. The point of a down payment is for buyers to prove to the lending institution or bank that they have enough funds to pay back the loan they’re applying for (which will eventually be your money). So earnest money is a good faith gesture to you, while the down payment is a good faith gesture to the lender. But they don’t have to come up with that chunk until the loan they seek is approved by the lender.
But wait. There’s more. While the lender is doing all its gyrations to approve the buyer’s loan, there is an appraisal as well as inspections, repairs, disclosures, and various contingencies. Apart from the appraisal, the need for all of these as well as specific timelines and deadlines depend on your contract. All the while, a title insurance company investigates whether the property meets the needs and requirements of the buyers and their lender.
So getting your money is no snap of the fingers. It can take anywhere from 30 days to three months, but the average time is 50 days. This is not to take anything away from closing day — the day when keys are handed over and the money hits your account.
Immediately after the transaction closes, escrow pays the seller the full purchase price in the form of a cashier’s check or wire transfer—minus any fees, taxes, or real estate commissions, which the seller is required to pay.
Now it’s time to celebrate. If the money is transferred via electronic transfer, the good news is that most of the funds are available within a day. But wire fraud is real and more prevalent than ever before. Be especially cautious when exchanging wiring instructions. Use only secure or encrypted email to trade banking information. And don’t forget people. They are real and they are there for you. Pick up the phone and have a conversation with your title company to ensure all is what it appears to be.
How Rates Move:
Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I’m among few mortgage professionals who have access to live trading screens during market hours.
Rates Currently Trending: Lower
Mortgage rates are trending slightly lower this morning. Last week the MBS market worsened by -36 bps. This was enough to worsen mortgage rates or fees. The MBS market was moderately volatile last week.
This Week's Rate Forecast: Neutral
Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) Central Bank, 2) Inflation, 3) Domestic News
1) Central Bank: Kazakhstan (Central Asia's largest energy producer) raised their key interest rate by 25 basis points to 9.75%. We will also get key interest rate decisions out of the Bank of Canada, The Bank of Japan, European Central Bank and the Bank of Brazil this week as we get ready for next week's Federal Reserve meeting where they are expected to officially announce their taper and the Bank of England's meeting where it is considered a "live" event with the potential for a rate hike on deck.
2) Inflation: We have several reports this week with internal inflationary components but the market focus will be on the Fed's key inflation measure, PCE which will be released on Friday.
3) Domestic News: The bond market will continue to focus on Initial Weekly Jobless claims to see if we can get a sub-300K reading for the third straight week as this is the last Weekly Jobless Claims data point that will be part of next week's NFP report. We also get the prelim 3rd QTR GDP data which is expected to be in the 2.5% to 3.0% range and Chicago PMI. Tuesday's Consumer Sentiment will also get a lot of attention.
Treasury Sales: Here is this week's Treasury auction schedule.
10/25 2 year note
10/26 5 year note
10/27 7 year note
This Week's Potential Volatility: Low
This morning we are starting with some recovery after the losses last week. Today's volatility should remain low to moderate with most of the big ticket news items later in the week.
If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.
Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.
All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.
MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.