Record Low Mortgage Rates Improve Housing Market Confidence

As record low mortgage rates continue to remain stable, housing market confidence amongst American consumers has shown improvement even as optimism in the overall economy and personal finances has stalled. 
According to Fannie Mae’s June 2012 National Housing Survey, both home prices and mortgage rates are the factors producing this positive sentiment towards housing with 73% of those surveyed saying it is a good time to purchase a home. This percentage matches the highest level recorded since this survey began two years ago.
According to the Mortgage Bankers Association’s Market Composite Index for the week ending July 6th, purchase applications increased 3% from the previous week. While the Refinance Index decreased 3%, it still comprises 77% of all mortgage applications.  Free RateUpdate.com’s survey of wholesale and direct lenders shows that mortgage rates have remained steady 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%, all available with 0.7 to 1% origination
fee for borrowers who have maintained good credit.
There remains a lot of opportunity for a home purchase since home affordability still remains unusually high. While mortgage refinances have slowed, FHFA reported that year to date through May 2012, 78,273 refinances were completed for underwater borrowers which far exceeds the total of 59,991 for all of 2011. HARP 2.0 is for underwater borrowers who have mortgages that were sold to Fannie Mae or Freddie Mac prior to June 1, 2009. While it offers no limit on loan to value, many borrowers have been denied due to lender restrictions. There are many lenders available to assist borrowers with obtaining HARP, but finding them is another issue. For that reason, inquiring online is probably the easiest and quickest means available to overcome these hurtles and find the lenders willing to help.

The expanded FHA streamline refinance boom has slowed since its initial availability during the week of June 11th. Nevertheless, it is still available to homeowners who have existing FHA mortgages that were endorsed prior to June 1, 2009. The special feature of this is an extremely low upfront mortgage insurance premium of .01% and an annual mortgage insurance premium of .55% until the end of 2013. Many lenders will only assist FHA borrowers who are already their customers which may be slowing down the pace of these refinance
applications.
These borrowers have other options available since there are other FHA approved lenders who will assist with these loans. With no cash out, the streamline refinance does not require an appraisal or other verifications and is usually a very fast and easy mortgage to obtain and well worth the effort when considering the current FHA interest rates. 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 rates are also available for home purchases using FHA mortgages. The low down payment requirements and easier credit qualifying with FHA is a major attraction with many home buyers. On the other hand, normal FHA closing costs (APR) are higher than conforming mortgages due to the the upfront mortgage insurance premium and other FHA fees. Since this can be an issue for some borrowers, FHA allows these costs to be added to the mortgage amount in most cases.
For the past week, jumbo mortgage rates have also remained steady. Current jumbo 30 year fixed mortgage rates are at 4.125%, jumbo 15 year fixed mortgage rates are at 3.125% and jumbo 5/1 adjustable mortgage rates are at 2.250%. To obtain these low jumbo mortgage rates with 0.7 to 1% origination fee, borrowers must show a history of excellent credit. Jumbo mortgages are considered private loans and generally have stricter guidelines. Usually the down payment requirements are higher, as well as, the amount of needed reserves. Sales of higher prices homes and jumbo mortgage activity is improving in higher cost areas, such as California and New York, possibly an indication that this part of the market is stabilizing.  
MBS prices (mortgage backed securities) didn’t have any significant changes this past week, not enough to move average mortgage rates. Mortgage rates move in the opposite direction of MBS prices. Several banking giants reported second quarter strong growth due to the increase in mortgage applications especially for government programs, HARP and FHA streamline refinance. Consumer sentiment was below expectations for June. Jobless claims dropped to 350,000 which is the lowest level since March 2008. Import prices declined 2.7% from May, June PPI rose 0.1% and Retail Sales fell -0.5% from May. Imports and exports decreased in China which could indicate a slowing of their economy. The International Monetary Fund reported that it has cut its forecast for global economic growth and gave a warning that it could get worse due to Euro zone programs and lack of solutions.
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.
July 18, 2012 — Realty Times Feature Article by Ed Ferrara