Favorable Mortgage Rates Help Housing Market Confidence

While conditions continue to show signs of improvement, favorable mortgage rates are helping housing market confidence amongst consumers. According to Fannie Mae's National Housing Survey for August, 35% of survey participants expect home prices to rise over the next year. Consumer attitudes, while stabilized, increased from August 2011.

This study involved attitudes towards owning a home, renting a home, mortgage rates, the economy and personal finances. When asked about mortgage rates, 40% of consumers expect higher rates are too good to last and will rise within the next 12 months. The National Association of Home Builders/First American Improving Market Index reported that a net total of 19 housing markets were added to the list.

To be included in the Improving Markets Index 3 increases must take place: the number of housing permits, employment and home price appreciation. According to CoreLogic, a mortgage and research analytics firm, home prices for July rose 3.8% above last year and is the largest annual gain in six years. Housing affordability continues to be high as low mortgage rates have continued and housing prices are still below their peak reached several years ago.

FreeRateUpdate.com's survey of wholesale and direct lenders shows that mortgage rates stayed 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%, available with 0.7 to 1% origination fee provided borrowers have good credit. Home purchase loans and traditional mortgage refinances require full documentation for employment, income and credit, all of which will be verified by the lender. HARP is a non-traditional mortgage refinance for borrowers who have loans that were sold to Fannie Mae or Freddie Mac prior to June 1, 2009.

While loan to values for HARP have a minimum of 80%, updates to the program with HARP 2.0 eliminated maximum loan to value caps. Although GSE guidelines for HARP do not require an appraisal, lenders may have overlays that eliminate some borrowers from receiving approval. Since guidelines differ for each lender, borrowers are encouraged to keep seeking a HARP refinance even if they have been denied. For more information about HARP, an online inquiry can be obtained without revealing detailed personal information.

For the past week, 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%, all remaining steady. FHA still attracts first time home buyers who want lower down payments and easier credit qualifying guidelines. Since many locations offer housing grants or loans through state or local agencies, qualified borrowers can receive additional help for the required down payment. Often, seller concessions can be put toward the FHA closing costs (APR) which tend to be high due to various FHA fees and the upfront mortgage insurance premium. At this time, the FHA streamline refinance with no cash out is very popular since it offers reduced upfront and annual mortgage insurance premiums for borrowers who have loans that were endorsed prior to June 1, 2009. This program does not require an appraisal or other documentation, but requires that borrowers have a good history of mortgage payments. Borrowers can find out more about FHA mortgages by submitting the online form which sends a response almost instantly.

Keeping in line, jumbo mortgage rates were firm over the past week with jumbo 30 year fixed mortgage rates at 4.250%, jumbo 15 year fixed mortgage rates at 3.125% and jumbo 5/1 adjustable mortgage rates at 2.250%, all available with 0.7 to 1% origination fee for borrowers who have a history of excellent credit. While jumbo mortgage guidelines may be stricter, the documentation required is generally the same as that which is needed for conforming mortgages. Higher down payments and additional months of reserves are normally necessary and, therefore, require that borrowers have substantial assets. Since these are private loans held by the lender, jumbo mortgages are considered risky. On the other hand, they are also profitable for lenders who offer them. As more lenders enter the jumbo mortgage market, borrowers will find that the competition may lead to more flexibility with guidelines and approval and are advised to shop around for the best jumbo mortgage rates and terms available.

Last week, markets became more volatile than has been seen recently. MBS prices (mortgage backed securities), which move mortgage rates in the opposite direction, had a few severe swings in both directions which left average mortgage rates still. Investors are now waiting for the Fed's to take further action with a QE3 plan, possibly this week. The Labor Department reported that only 96,000 jobs were added in August although the unemployment rate fell to 8.1% due to the number of people leaving the work force. The labor force participation rate fell to its lowest level seen sine 1981. Unemployment applications fell by 12,000 for the previous week while productivity increased at a 2.2% annual rate. The big market mover was when the European Central Bank announced a new plan to purchase bonds in Europe in order to contain the Euro zone crisis and prevent a financial collapse.

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 14, 2012

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