Mortgage Rates Remain Low as Housing Reports Show Mixed Results
by Ed Ferrara
Wednesday, October 24, 2012
This is the result of home builders having increased confidence in the growth of single family homes. The Commerce Department reported last week that September Housing Starts increased to an annual rate of 872,000 which was a jump of 15% from August and higher that investor expectations. Privately own homes under construction rose for the third straight month and was much higher than anticipated, reaching the highest level since 2008. Building Permits, which represents future activity, increased 11.6% from August and was 45.1% higher than a year ago.
Existing Home Sales for September were down 1.7%, but was still more than a year ago. Decreasing 3.3%, Housing Inventory is now at an approximately 5.9 month supply level and at the lowest level since March, 2006. While low inventory pushes home prices higher, it also pushes some potential home buyers out of the buying market at a time when mortgage rates are at record lows.
FreeRateUpdate.com's survey of wholesale and direct lenders showed that mortgage rates continue to remain at affordable low levels for the past week with 30 year fixed mortgage rates as low as 3.000%, 15 year fixed mortgage rates as low as 2.375% and 5/1 adjustable mortgage rates as low as 2.375%. It is a requirement that borrowers have good credit in order to obtain the lowest mortgage rates available.
Conforming mortgages must all be fully documented for employment, income and assets. This information is verified by the lender who then can determine if the loan can be approved. At this time, home purchase loans and traditional mortgage refinances require the most amount of information as lenders are still reluctant to approve mortgage that may increase their risk. HARP is a refinance program offered to borrowers who have loans that were sold to Fannie Mae or Freddie Mac prior to June 1, 2009. With the HARP 2.0 update, loan to value caps were removed so that more borrowers, especially those who are extremely underwater, can obtain the low mortgage rates offered today.
Some borrowers may be eligible and qualified for HARP, but for some reason, may also be denied since many lenders have their own guidelines. In order to eliminate this issue and give borrowers an opportunity to refinance, the online form is available for all borrowers, even those who have been denied. While submission does not require a social security number, borrowers can still expect to receive a response almost instantly.
FHA mortgages are widely used by first time home buyers who may not have enough cash for conforming loan requirements. Others may use FHA because of the easier credit requirements and flexible qualifying guidelines. Regardless, FHA mortgages offer excellent benefits to all borrowers. Home buyers can use approved gifts and housing grants or loans to help with the down payment that can be as low as 3.5%. Depending on a borrower's needs, FHA also has several mortgage programs available, such a rehab and energy efficient loans.
Mortgage rates for FHA mortgages continue to be very competitive with the FHA 30 year fixed rate mortgage currently as low as 3.000%. On the down side, FHA closing costs (APR) are higher due to various FHA fees and the upfront mortgage insurance premium. However, these costs are allowed to be added to the mortgage amount in most cases or paid through seller concessions. FHA mortgage holders also have the FHA streamline refinance which is a quick and easy way to trade in an existing FHA loan for lower mortgage rates. This refinance does not allow for cash out, but it also does not require an appraisal or other documentation.
As an incentive to get more borrowers into cheaper loans, FHA has reduced the upfront mortgage insurance premium to .01% and the annual mortgage insurance premium to .55% for those who have loans that were endorsed prior to June 1, 2009. By doing so, more borrowers can trade in to lower FHA mortgage rate loans even if they are extremely underwater. This special offer runs through the end of 2013. Since many lenders will only offer this to their existing customers, the online form is available for all borrowers who want more information regarding the FHA streamline or other FHA loan programs. Borrowers will receive a response within minutes with the information they are seeking.
Jumbo mortgage rates have been remaining only slightly higher than conforming mortgage rates. Jumbo 30 year fixed mortgage rates are as low as 3.500%, jumbo 15 year fixed mortgage rates are as low as 3.125% and jumbo 5/1 adjustable mortgage rates are as low as 2.500%. Excellent credit and substantial qualifications are required in order to receive the lowest jumbo mortgage rates offered. Jumbo mortgages need the same type and amount of documentation as conforming mortgages, although more than one appraisal may be required. These loans often have strict guidelines since they are considered a risk to lenders who hold them within their portfolios. On the other hand, jumbo loans are profitable which also makes them desirable by lenders. Well qualified borrowers may find lenders offering flexibility with their guidelines in order to obtain the business.
Mortgage rates have remained steady for the past week as there were not many fluctuations in MBS prices. MBS (mortgage backed securities) affect mortgage rates which move in the opposite direction. Third quarter corporate earnings have been influencing stocks and bonds over this past week. Data released included September CPI which increased 0.6% which was better than expected. Industrial Production for September was stronger than projections as it increased 0.4% from August. Jobless claims rose 46,000 to a seasonally adjusted 388,000 for the week ending October 13th which was more than expectations of 365,000.
FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at about a 1 point origination fe
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