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Mortgage Rates: Rising Home Prices Drive Housing Recovery Forward

By: Rosemary Rugnetta | May 1st, 2013

Rising home prices continue to drive the housing recovery forward as was seen in the most recent S&P/Case-Shiller Home Price Index. The indices showed that average home prices rose 8.6% and 9.3% for the 10 and 20 City Composites for the 12 months ending in February 2013. From January to February, the 10 and 20 City Composites increased 0.4% and 0.3%. According to the report, both Composites had the highest annual growth rates since May 2006 and all 20 cities had higher prices for two months in a row, something that hasn’t happened since early 2005. The four cities with the highest year-over-year price increases were Phoenix, San Francisco, Las Vegas and Atlanta.

Current conforming 30 year fixed mortgage rates are as low as 3.250%, 15 year fixed mortgage interest rates are as low as 2.250% and 5/1 ARM loan rates are as low as 2.250%. Borrowers are required to have good credit in order to receive low rates offered by lenders at the time of application. The Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending April 26th shows that application volume increased 1.8% on a seasonally adjusted basis. The seasonally adjusted Purchase Index fell 1.4% and the Refinance Index rose 3%. Refinance applications hit the highest level since the week ending January 18th and represented 75% of total applications. HARP applications increased to 34% of all refinance applications which is the highest level since February 2012. HARP is the Home Affordable Refinance Program which is available for underwater homeowners who have loans that were sold to Fannie Mae and Freddie Mac prior to June 1, 2009. Since HARP guidelines do not have loan to value caps, there is no need for an appraisal in most cases. Information for HARP loans, traditional refinances and purchase loans can be obtained when submitting the online form that will return a response almost instantly.

Today’s FHA 30 year fixed mortgage interest rates are as low as 3.125%, FHA 15 year fixed rates are as low as 3.325% and FHA 5/1 ARM loan rates are as low as 2.750%. FHA loans continue to be popular with first time home buyers because they allow homeownership with a low down payment of 3.5%. Borrowers can also use housing grants or loans, as well as, gifts from approved sources when obtaining an FHA mortgage. FHA does have an annual mortgage insurance premium which, effective June 3, 2013, will need to be paid for the entire life of the loan since it is no longer allowed to be canceled. In addition, FHA closing costs (APR) are high because of the upfront mortgage insurance premium and other FHA fees. However, seller concessions up to 6% are often used for this purpose. FHA continues to offer the FHA streamline refinance program which does not require an appraisal or other documentation as long as there is no cash taken out. To enhance the FHA streamline program, FHA is offering reduced upfront and annual mortgage premiums for loans that were endorsed prior to June 1, 2009 (offer is available until the end of 2013). Since borrowers must use FHA approved lenders when seeking FHA purchase loans or FHA refinances, the online form is available to make this search easier. This process does not require the input of a social security number.

Current jumbo 30 year fixed interest rates are as low as 3.375%, jumbo 15 year fixed mortgage rates are as low as 2.625% and jumbo 5/1 ARM loan rates are as low as 2.375%. Due to the large amount of funds involved with jumbo mortgages, lenders require that borrowers have excellent credit in order to receive low jumbo rates. Full documentation for employment, income and assets must be submitted and will be verified by the lender. Lenders will look for substantial assets that are needed for the larger down payment and additional months of reserves. Guidelines for jumbo loans, as well as, jumbo rates, can be very competitive from lender to lender. For this reason, borrowers should shop around and can easily do so by submitting the online form which will return a response almost immediately.

MBS prices (mortgage backed securities) are up +7/32 (FNMA 30 yr 3.0 at 104.25) which is higher than earlier morning levels. Mortgage rates are affected by MBS prices and move in the opposite direction. The Commerce Department reported that construction spending was down in March 1.7%. ADP reported that private sector job growth slowed down in April with employers adding only 119,000 new jobs.

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