UPDATE: July 20th – The newest article on Wells Fargo mortgage rates is available here: Wells Fargo Mortgage Rates Following Current Interest Rates Higher.  Interest rates are currently in an uptrend that is likely to send average mortgage rates higher.  How much higher will they go?  Please read the article to find out.

The July 5th edition of Wells Fargo Mortgage Rates article is available here: Wells Fargo Mortgage Rates Could Have an Interesting Summer.  The next few weeks could determine a lot as far as the direction of average mortgage rates.  Will mortgage rate trends continue higher or are we going to see historic lows before the summer is over?

June 29th – The most up-to-date mortgage rate predictions article has been published here: Mortgage Rate Predictions – Rates Find Support This Week? Also remember that on Subprime Blogger we are going to release daily mortgage rates and how they correlate to the to 10 year treasury rate; please check back in every morning to get a prediction of where rates are headed based on the daily trading moves of the 10 year treasury rate.

Over the last six months, mortgage rates have plummeted to levels never seen before by many American adults.  A full percentage point drop since October has caused a stir in the housing market.  Many home owners are scrambling to finish mortgage applications in hopes to refinance at much lower rates.  Now that mortgage rates are almost at an all time low, how much money will you save?

To determine how much money you will save you need to first pull out your handy mortgage calculator.  There are several available all over the net but my favorite is located here.  You will be able to put all the correct financial numbers in the calculator and come up with an amount for an entire mortgage.  Do this for your current rate and the amount you owe on your house and write that number down.  Do the same exact thing for a rate you think you would qualify for.

How do you determine what rate you would qualify for?  This is a very difficult question as every situation is unique.  You may have a credit rating over 800, make over $100,000 a year and have no credit card debt.  You would think this would qualify you for the best possible rate, right?  Well, that may not be the case if your home has greatly decreased in value.  If you currently owe more than your home is worth, it is likely that you will not get a rate much better than your current rate.  If you have been making mortgage payments on the house for several years, this may not be the case, but many young professionals do not have a significant amount of equity in their home.

Another common situation is that your credit score was really good until the current recession.  During the recession you have received a pay cut and your hours have been reduced; no more overtime for you.  In this case, many Americans are resorting to credit cards as a much larger chunk of their paycheck is going towards their mortgage and vehicle payment.  By putting more money on their credit cards they are hurting their credit score each and every day.  Credit card companies see that you are increasing the overall balance and making payments of lower amounts.  Unfortunately many of the credit companies jack up your rate when they see this trend.

The credit card bill of rights signed by President Obama is aimed as stopping this, but it is going to take quite some time for that to take effect and there are sure to be loopholes.  If you have not received a credit score in the last six to nine months, it might be wise to check it out.  You never know what your credit history may show.  If your credit score comes in under 740, you will struggle to have any leverage with mortgage lenders.  To compound matters, if your credit score has gotten worse, you will not get a lower mortgage rate and you still owe a great amount of money on your credit cards.  This is happening all too often to Americans in the current economic state.

If you feel you are not in a bad financial position and you have a loan-to-value ratio of under 90% then you can definitely refinance at a lower mortgage rate.  Wells Fargo has been, by far, the best mortgage lender in America through the entire subprime mortgage crisis.  Some would argue that they have been the best mortgage lender for several decades.  With that being said, Wells Fargo knows they are the biggest kid on the block with the best balance sheet.  They are going to make sure that it stays that way.

To make sure their balance sheet stays clean, Wells Fargo will not complete any applications from extremely risky borrowers.  If you were considered a subprime borrower in the past, it is likely that Wells Fargo still sees you as a subprime borrower.  Unfortunately, you must totally change your life financially to get out of this hole and that is extremely hard with the economy being so bad.  If the unemployment rate is increasing, home prices are decreasing and credit scores are falling apart, what can one do?

Well, sadly, there is not much you can do other than work very hard to credit a budget and stick to it.  If you create a strict budget and do not spend excess money on unnecessary items, you will dig yourself out of the hole.  The only problem is that it make take several years and even decades for this to happen.  It is worth it in the long run as there are very few feelings that are better than financial freedom.

For those of you who have been smart with your money and qualify for Wells Fargo’s low mortgage rates you could save a ton of money starting today.  Once again, revert back to the mortgage calculator I talked about at the beginning of this article.  If you punch the numbers and find that you could be saving a large amount of money on each monthly mortgage payment, you should definitely apply for a refi.

Be aware that there are often quite a few fees and charges that will go into the application process.  This is all too true now that mortgage rates are hitting historic lows.  Mortgage lenders know that there is a renewed interest in the housing market and refinancing so they have increased the amount of closing cost fees to make an extra buck or two.  The lower mortgage rates go, the more you will have to pay in fees and charges, that’s just the way the market works.

There are lenders out there that do no closing cost mortgages but they will tell you that you will not get the lowest rate due to the fact that there are no fees.  Many websites will illustrate this point on their front page so you do not go into their establishment confused.  The best practice is to find out how much you will pay in closing costs and see if it is worth it to get that lower rate or to pay nothing in closing costs.

Why will mortgage rates go up?!?  Well, it is psychology and the great number of mortgage applications.  Mortgage lenders cannot keep up with the great number of mortgage applications that they are seeing so they only way to slow the number of applications down is to increase mortgage rates.  The other major aspect of the mortgage market that is going to cause rates to increase is psychology.  When you hear mortgage rate these days you almost immediately hear someone say they are going to go down.  I am a strong believer in going against the crowd and this is a time when everyone thinks rates are going to decline.

Overall, I believe the mortgage rate trend is down, but for the short term, I think we are going to see mortgage rates grind sideways or work their way back up to the 5% mark.

Not only was the acquistion of Wachovia a notch on the belt of Wells Fargo, so was the mortgage market.  With rates hitting historic lows, Wells Fargo stated that mortgage applications jumped 64% to $190 billion, $84 billion in March alone.  Like many mortgage lenders, Wells Fargo is struggling to keep up with the amount of mortgage applications so they are actually increasing their staff to keep up with the demand.

Bank of America and Citi jumped on the wagon by saying that they would be profitable for the first three months out of the year.  Do not get Wells Fargo confused with Bank of America and Citi.  Wells Fargo has very little exposure to subprime, almost none before the Wachoiva acquistion.  The subprime exposure that Bank of America and Citi have almost caused them to go bankrupt.  It is highly likely they would have gone bankrupt if the government would not have stepped in.

Overall, Wells Fargo feels that the mortgage market is healthy as mortgage applications increase with 25% of mortgage being home purchases rather than refinancings.  My question remains, are these mortgage applications getting approved?  I do not see a huge drop in new housing supply so how can their be an increase in home purchases?  Maybe the data will reflect these home purchases in the next few months; only time will tell.

We all know that many banks and mortgage lenders are in horrible financial condition.  Now the government is forced them to lend at extremely low rates which is pushing people through their doors.  The problem is that many of these lenders are not ready for the influx of mortgage applications.  I honestly feel that we will start to see mortgage rates go higher due to the fact that lenders cannot keep up with the applications.

Not only are lenders struggling to go through all the applications, they are also struggling to fund many of these mortgage loans.  Almost every financially sound home owner in America has a desire to refinance at these low rates.  If only 1/5 of America does go through the mortgage application process, lenders are going to find it VERY difficult to fund these mortgage loans.  The only way to solve this issue is for lenders to turn away borrowers who are not elite.  If there is a second thought by the lender, it is likely the borrower will not get financed.

The next few months should be extremely interesting in the housing market, but I still do not see a bottom any time soon as the unemployment rate and new housing supply continue to rise.