Purchase Applications Increase as Mortgage Rates Remain Low
by Ed Ferrara
Thursday, July 19, 2012
The Refinance Index fell 8% and was due to a drop in government backed loan applications. The rush on the FHA streamline refinance that occurred the week of June 11th created a surge in refinance applications which are now moving back to a normal pace.
On a good note, the Purchase Index increased 1% which shows that consumers are indeed making home purchases at a time of high affordability. Home affordability is measured by the price of homes, the current mortgage rates and the average income levels. It was reported last week that the average hourly wage rose 2% from last year and is outpacing inflation.
FreeRateUpdate.com's survey of wholesale and direct lenders shows that mortgage rates have remained steady at record lows 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 well qualified borrowers who have good credit. While mortgage refinances accounted for 78% of all mortgage application activity, HARP refinances totaled 24% of those refinances.
HARP 2.0 is still fairly new and runs through the end of 2013. Available for underwater mortgages that were sold to Freddie Mac and Fannie Mae prior to June 1, 2009, HARP was expanded to included unlimited loan to values and, in many cases, an appraisal is not necessary. Many borrowers are finding denials for HARP frustrating, but should nevertheless continue to look for a lender who will assist them. Using a reliable online resource is the easiest means of obtaining a HARP refinance.
With the expanded FHA streamline refinance that was made official on June 11th, millions of borrowers will be able to refinance FHA loans with lower FHA insurance premiums. For FHA mortgages endorsed prior to June 1, 2009, the upfront mortgage insurance premium is .01% and the annual mortgage insurance premium is .55%.
The FHA streamline with no cash out also allows for an extremely quick and easy transaction since no verifications are involved and no appraisal is necessary. Since any approved FHA lender can assist with the FHA streamline refinance, borrowers will find that online inquiries are the easiest and fastest way to receive results.
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%. FHA mortgages for home purchases still offer a variety of mortgage programs, as well as, low down payments and easier credit qualifying. For regular FHA mortgages, the closing costs (APR) are high because of the upfront mortgage insurance premium and various FHA fees, but these costs are often added to the loan amount as long as all FHA guidelines are followed.
Also remaining the same, 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%. With excellent credit, these low jumbo mortgage rates are available with 0.7 to 1% origination fee. Although jumbo mortgages are not as popular as conforming and FHA mortgages, they are needed for the high end real estate market. Many home prices in the high end market are beginning to stabilize or even increase. Last month's jumbo mortgage purchase loans rose to 19.1%, the highest level since 2007 when it was 21.7%, according to DataQuick, a San Diego research company.
MBS prices (mortgage backed securities), which move mortgage rates in the opposite direction, have continued to fluctuate without having any major rallies. Economists are now predicting that the sluggish economy will last for the rest of the year. The Labor Department reported that 80,000 new jobs were added in June which disappointed many investors as it left the unemployment rate at 8.2%.
The Euro zone continues to be troubling as more countries are looking for a bailout, Spain and Italy's borrowing cost are skyrocketing and the endless meetings have yet to produce a sustainable solution. With all that is going on, it looks like mortgage rates may continue to remain at records low for quite some time.
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.
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