Refinances Increase as Low Mortgage Rates Remain Consistent

FHA recently announced that streamline refinances will no longer be part of the FHA Compare Ratio which is used for lenders. This will eliminate the lender's risk on completing a loan that is not fully underwritten since FHA streamline refinances do not require the ordinary income, assets and appraisal documentation. Based on this FHA update, FHA streamline refinances may start to surge as more lenders are willing to put them through for approval with consequences. Current FHA 30 year fixed mortgage rates are at 3.250%, FHA 15 year fixed mortgage rates are at 2.750% and FHA 5/1 adjustable mortgage rates are at 2.750%. FHA still remains popular with first time home buyers because of the multiple mortgage programs and down payment assistance options. Since FHA mortgage rates are not affected by credit scores, they are perfect for home buyers who do not have perfect credit. While FHA closing costs (APR) are higher because of various FHA fees and the upfront mortgage insurance premium, these costs can be included into the mortgage under certain circumstances.

Increasing .125%, jumbo 30 year fixed mortgage rates are at 4.250%. Remaining the same, jumbo 15 year fixed mortgage rates are at 3.375% and jumbo 5/1 adjustable mortgage rates are at 2.500%. Although jumbo mortgages are not as popular as other mortgage types, there is still a need for them for mortgage financing above the conforming and FHA loan limit. Because of the large amount of funds involved, jumbo mortgages usually have stricter guidelines that are set by lenders. Full documentation is required for income, assets and debts that will be verified by the lender. Substantial funds are also required for larger down payments and additional months of reserves which is determined by individual lender guidelines.

MBS prices (mortgage backed securities) did not see any big changes this week. MBS prices fluctuate and affect mortgage rates which move in the opposite direction. According to the National Association of Realtors Housing Affordability Index, home affordability conditions continue to be historically favorable across the county which is the result of affordable home prices and low mortgage rates. Other reports showed that Consumer Sentiment was lower than expected for the beginning of February according to Reuters-University of Michigan Consumer Sentiment Index. Improving job conditions were seen with U.S. job openings which increased 8.3% in December according to the Department of Labor Statistics. Unemployment claims decreased again for the week ending February 3rd. Most of the news came out of the Euro zone as negotiations continued through most of last week until a plan for a new deal was reached on Thursday. By Friday, several resignations took place in Greece which caused additional turmoil. Now that the deal is signed, protests against austerity plans have increased in Greece causing more uncertainty. This is a situation that will continue to unfold and further affect markets.

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 .07 to 1% point origination fee.


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