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Homeownership Still a Good Decision Even as Mortgage Rates Change

Written by on Tuesday, 06 August 2013 7:00 pm
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While homeownership numbers may be down, Americans continue to believe that owning a home is still a good decision even as mortgage rates have changed. According to the National Association of Realtors 2013 National Housing Pulse Survey, eight in 10 people believe that purchasing a home is a good choice and 68% believe that now is a good time to make a purchase. Since the last survey in 2011, renters who are contemplating a home purchase rose from 25% to 36% while those who stated they prefer to rent fell from 31% to 25%. More than half of the renters surveyed stated that one of their highest priorities is owning a home, up to 51% from 42%.  

According to the most recent survey of wholesale and direct lenders performed by FreeRateUpdate.com,  current conforming 30 year fixed mortgage rates are as low as 3.875% (APR 4.052%), 15 year fixed mortgage interest rates are as low as 2.750% (APR 3.168%) and 5/1 adjustable mortgage rates are as low as 2.375% (APR 2.628%). Low rates are available to borrowers who have maintained a history of good credit. Borrowers must also meet the qualification guidelines that are required for approval.

Mortgage purchase applications fell 3% for the week ending July 26th, according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey. However, purchase volume is approximately 5% higher than the same time last year. Refinances have been hit hard by the recent news concerning rising rates.

The report also showed that the Refinance Index dropped 4% for the week and has reached the lowest level in more than two years. Total mortgage refinance activity is unchanged at 63%. HARP loan business continues to be healthy and rose to 37% of all refinance applications. There are still many underwater homeowners who are eligible for a HARP refinances which will be available until the end of 2015.

Current FHA 30 year fixed mortgage rates are as low as 3.750% (APR 4.000%), FHA 15 year fixed rates are as low as 3.250% (APR 3.514%) and FHA 5/1 adjustable mortgage rates are as low as 2.500% (APR 2.925%). First time home buyers continue to use FHA loans because of the many benefits, including the low down payment of 3.5% with a credit score as low as 620. Becoming very popular is the FHA 203k loan which is for homes that need repairs or rehabilitation.

One of the drawbacks to FHA mortgages is the higher FHA closing costs (APR) which is due to the upfront mortgage insurance premium and other FHA fees. However, borrowers often use seller concessions up to 6% for this purpose. The FHA streamline refinance is offered as an quick and easy way to move to a better mortgage without the need of any documentation or an appraisal as long as there is no cash taken out. Some borrowers, those who have loans that were endorsed prior to June 1, 2009, can use the streamline to refinance and will receive reduced upfront and annual mortgage insurance fees. This offer is available until the end of 2013.

Jumbo 30 year fixed mortgage rates are as low as 4.000% (APR 4.209%), jumbo 15 year fixed rates are as low as 3.125% (APR 3.501%) and jumbo 5/1 adjustable mortgage rates are as low as 2.750% (APR 2.908%). Borrowers must have excellent credit and strong qualifications in order to receive low jumbo rates.

Qualifying includes proof of substantial assets that are needed for the larger down payment and months of reserves that are necessary for approval of the loan. Jumbo loans have been an incredible bargain for home buyers since jumbo rates have not be much higher than conventional loan rates. Lenders tend to be very competitive when it comes to jumbo rates and flexibility with guidelines.

MBS prices (mortgage backed securities) continue to be volatile which has caused a slight increase in mortgage rates over the past month. Mortgage rates move in the opposite direction of MBS prices. Last week, the GDP for the second quarter was reported at 1.7%, according to the Bureau of Economic Analysis. The Bureau of Labor Statistics reported that the economy added 162,000 jobs during the month of July. In addition, the unemployment rate dropped to 7.4%.

FreeRateUpdate.com researches and reports advertised rates of active lenders within the FreeRateUpdate.com network.

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  About the author, Ed Ferrara

Individual news stories are based upon the opinions of the writer and does not reflect the opinion of Realty Times.