Friday, October 28, 2011

MORTGAGE & FINANCE: Mortgage Applications Increase as Low Mortgage Rates Remain Steady

As markets changed directions this past week with stocks moving higher, pressure was put on mortgage rates as MBS prices suffered. In the end,'s survey of wholesale and direct lenders show that mortgage rates remained the same regardless of market volatility. Low mortgage rates that have remained steady have actually been successful in attracting consumers according to the Mortgage Banker's Association who reported that mortgage applications for both refinance and purchase applications increased for the week ending October 7th.

Applications for FHA mortgage loans have also been on the increase. Many consumers find that FHA's consumer friendly guidelines make it easier to obtain mortgage financing. Staying competitive with conforming mortgage rates, FHA 30 year fixed mortgage rates are at 3.750%, FHA 15 year fixed mortgage rates are at 3.500% and FHA 5/1 adjustable mortgage rates are at 2.750%. FHA's loan limit for one unit properties is $271,050 in most areas, while in high cost areas it can be as high as $625,500. FHA loan limits are based on the median home price of an area. Just about anyone with decent credit can obtain an FHA mortgage since FHA, in their effort to increase affordable homeownership, has easier credit qualifications. An often overlooked benefit of FHA is that these mortgages are assumable should a borrower decide to sell their home. Although FHA closing costs (APR) tend to be higher because of various FHA fees and the upfront mortgage insurance premium, FHA does have a list of what closing cost fees are allowed which is there to protect borrowers.
Although statistics could be better, borrowers looking for a bargain are out there taking advantage of what is being offered. Still at their lowest levels, 30 year fixed mortgage rates are at 3.875%, 15 year fixed mortgage rates are at 3.250% and 5/1 adjustable mortgage rates are at 2.625%. These are the lowest conforming mortgage rates available with 0.7 to 1% origination fee. While the 30 year conforming mortgage is usually the choice for new home buyers, the 15 year conforming mortgage has been a favorite for refinancing. Even though monthly savings may not be significant, being finished with mortgage payments sooner is enough incentive for many borrowers. Conforming mortgage loans require that borrowers have good credit scores, but having a reasonable amount of assets can compensate for credit scores that fall below 700. Long term employment is also a plus for borrowers seeking a conforming mortgage loan with low mortgage rates. Since there are many factors that make up the underwriting process,
borrowers should not underestimate their chances of obtaining a conforming mortgage that is currently available with low mortgage rates.

Jumbo mortgage rates remain intact again this week. Current jumbo 30 year fixed mortgage rates are at 4.750%, jumbo 15 year fixed mortgage rates are at 4.375% and jumbo 5/1 adjustable mortgage rates are at 3.250%. Well qualified borrowers who have excellent credit can obtain these low jumbo mortgage rates with 0.7 to 1% origination fee. Jumbo mortgages are used for financing above the conforming loan limit which is dependent on the location of the property. If a borrower is in an area that has a higher conforming loan limit of $625,500, such as Hawaii, anything above that amount will require a jumbo mortgage. Other metropolitan areas, such as New York and California, tend to have high cost areas with housing prices above the normal $417,000 conforming loan limit. These are the areas where most of the jumbo mortgages will be required.

MBS prices (mortgage backed securities) had mortgage rates on the edge this week as they suffered through stock market increases. MBS prices affect mortgage rates which move in the opposite direction. Investors were confident that Euro zone debt issues would be solved until this weekend when Germany's finance minister voiced doubts that a definite solution would come out of the European Union summit. Here in the U.S., data showed that for the month of September, increases were seen in manufacturing, retail sales, import and export prices. On the downside, consumer sentiment decreased in the beginning of October which did not have much of an affect on markets. Now that third quarter reports are beginning to roll out this week, investors are reacting and are looking to move to safer assets. MBS prices started this week with better pricing which will help keep mortgage rates down. surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard .07 to 1% point origination fee.

Ed Ferrara Realty Times October 19, 2011

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