Existing Home Sales Improve as Mortgage Rates Remain Low

The housing market recovery continues its pace as shown in the latest report from the National Association of Realtors. According to the report, existing home sales rose 7.8% on a seasonally adjusted basis during the month of August and was 9.3% higher than August, 2011. Single family home sales increased 8% while condominium and co-op sales increased 6.1%.
The price of homes also increased with the median home price of all housing types up 9.5%. Housing inventory was up 2.9%, a 6.1 month supply, at the end of August according to the report. While investor purchases stood at 18%, first time home buyers accounted for 31% of existing home purchases for the month. Favorable buying conditions, which includes the continued low mortgage rates still in place, is adding strength to this sector of the economy.
FreeRateUpdate.com's survey of wholesale and direct lenders shows that mortgage rates remained firm this past week with 30 year fixed mortgage rates at 3.375%, 15 year fixed mortgage rates at 2.750% and 5/1 adjustable mortgage rates at 2.125%. These low mortgage rates are available with 0.7 to 1% origination fee for borrowers who have good credit.
Normal documentation for conforming mortgages, both home purchase loans and traditional mortgage refinances, requires proof of income, employment and assets. In some cases, additional information will be requested by the lender after examination of the loan file. Since mortgage rates are expected to remain low, consumers who are interested in a home purchase should take the necessary steps now to improve their credit scores as soon as possible while home prices are still affordable.
The latest Mortgage Banker's Association Weekly Mortgage Application Survey for the week ending September 14th showed that the Refinance Index increased 1% from the previous week and accounted for 81% of all applications. Refinance applications for HARP accounted for 22%. HARP is a non-traditional refinance program that is currently available for existing homeowners who have loans that were sold to Fannie Mae or Freddie Mac prior to June 1, 2009.
When this program was updated to HARP 2.0, loan to value caps were removed which is making it possible for deeply underwater borrowers to refinance to lower mortgage rates. However, the minimum loan to value is 80% and is something that lawmakers have proposed changing in the near future so that everyone could refinance with this streamline process. While HARP does have guidelines to follow, an appraisal is not necessary in most cases. This program is in effect until the end of 2013 which gives eligible borrowers plenty of time to qualify. To receive more information about HARP or other mortgage programs, the online form is available and will returned a response almost immediately.
FHA loans continue to be popular with first time home buyers, especially since credit qualifying is much more flexible. Applicants may also find that FHA mortgage rates have been lower than conforming mortgage rates in recent months which is not always the case. Current FHA 30 year fixed mortgage rates are at 3.125%, FHA 15 year fixed mortgage rates are at 2.625% and FHA 5/1 adjustable mortgage rates are at 2.625%. These purchase loans require a low down payment of 3.5% with credit scores as low as 580 and 10% with scores down to 500, although some lenders do have their own requirements also known as overlays.
FHA is known to have higher closing costs (APR) due to various FHA fees and the upfront mortgage insurance premium, although these are usually added to the loan amount or paid through seller concessions. Gaining in popularity is the FHA streamline refinance with no cash out which does not require any documentation or an appraisal. Borrowers who have FHA loans that were endorsed prior to June 1, 2009 can obtain the FHA streamline with a reduced upfront mortgage insurance premium of .01% and annual mortgage insurance premium of .55%. These reductions are available until the end of 2013 which gives borrowers plenty of time to submit an application. The online form is available for submission and does not require a social security number or other detailed personal information.
Decreasing .125%, jumbo 30 year fixed mortgage rates are now at 3.875%, which is an extremely low rate for this type of mortgage. Jumbo 15 year fixed mortgage rates are at 3.125% and jumbo 5/1 adjustable mortgage rates are at 2.250%. A history of excellent credit is required in order to obtain these lowest jumbo mortgage rates with 0.7 to 1% origination fee. Jumbo mortgages have been on the increase in recent months as the high end housing market has shown serious improvements. While guidelines for these mortgages are known to be stricter, borrowers are usually well qualified to meet the standards. For this reason, lenders are willing to accept the risk because there is also a lot of profitability surrounding these loans. According to Inside Mortgage Finance, originations for non-agency jumbo mortgages for the first two quarters of 2012 were 35.8% above 2011.
MBS prices (mortgage backed securities) affect mortgage rates which move in the opposite direction. Last week's movement of MBS was not enough to cause any major mortgage rate changes. Jobless claims were reported as 383,000 which was above expectations. According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index, builder confidence for September rose to 40 which is now the fifth consecutive month of increases and the highest since June, 2006. The strength and growth of the global economy is still a major concern to investors especially as Europe's crisis continues to drag on.
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 a standard 0.7 to 1% point origination fee.

Written by Ed Ferrara
September 26, 2012 

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