June 22nd, 2016 9:34 AM by Jackie A. Graves, President
out to buy or refinance a home this month will find current mortgage rates are
lower than they were last June, which means you'll pay less for a loan.
That's surprising because it's been well over a year since the
Federal Reserve ended a campaign to drive down long-term interest rates, a move
that was widely expected to push mortgage rates higher.
Indeed, the average interest rate on a conventional 30-year
fixed-rate home mortgage loan is more than two-fifths of a percentage point
less than in early June 2015.
That decreases the payment on those loans — the most popular way
to finance a home — by about $23 a month for every $100,000 borrowed. It
reduces the total interest payments over the life of the loan by nearly $8,500.
And remember, that's the average cost of financing a home. Savvy borrowers
with decent credit can almost always pay a quarter to half point less.
Spend a few minutes searching our extensive database for the
best current mortgage rates from dozens of lenders in your area.
You'll see what we mean.
Type of loan
30-year fixed rate
Dec. 5, 2012
15-year fixed rate
May 1, 2013
30-year fixed jumbo
Feb. 11, 2016
One oddity that's carried over into this year is that the average cost of
30-year fixed-rate jumbo loans remains just below that of smaller 30-year
fixed-rate conventional mortgages.
In fact, the 30-year jumbo mortgage has hit record lows this
Jumbo loans are mortgages that are too large to be purchased by
Fannie Mae and Freddie Mac, the two government-owned companies that buy or
guarantee most of the mortgages issued by banks and other lenders.
The largest loans they can buy depend on where the home is
located but range from $417,000 in most places to $625,000 in the nation's most
Jumbo mortgages are most needed by affluent buyers whose savings
and earnings have rebounded from the recession more quickly and fully than
those of middle-income families.
They've driven a surge in the sales of high-end homes that has
jumbo lending accounting for about one-fifth of all new mortgages, up from
about 5% of the market in 2009.
The nation's largest banks, including J.P. Morgan Chase, Bank of
America and Wells Fargo, are vying for that business not only by lowering rates
but by reducing the minimum credit score and down payment required for
Last year, for example, J.P. Morgan announced it was lowering the minimum
acceptable FICO score from 740 to 680 and accepting down payments of as little
as 15% on homes up to $3 million.
The sale of such pricey property helped to push median home
values, and the average amount Americans are borrowing to finance those
purchases, to all-time highs, eclipsing previous records set at the peak of the
housing bubble in 2006 and 2007.
Despite that, a report from the Consumer Financial Protection
Bureau found that nearly half of Americans seriously consider only one lender
or broker before applying for a mortgage. And about 75% fill out an application
with only one lender.
We need to be doing more comparison shopping than that,
especially when interest rates are rising.
The Federal Reserve was supposed to slowly start pushing interest rates higher
this year, causing mortgage costs to steadily increase.
Indeed, the Mortgage Bankers Association projects the average
cost of a 30-year fixed-rate loan will rise to 4.9% by the end of 2017 and 5.8%
Of course, that hasn't yet been the case.
Home loans aren't only cheaper than last year, they're also
becoming easier to get, even for buyers not in the jumbo market.
Home buyers who qualified for conventional loans had an average
FICO credit score of 763 in 2012, according to Ellie Mae.
By 2015, that had fallen to 754, and that's about where it
remained for all of last year, according to the most recent data.
The average FICO score for homeowners who refinanced through a
conventional loan fell from 748 at the end of 2012 to 727 at the end of 2015.
In April, that moved to 732 for a conventional refinance, 753
for a purchase.
FHA loans clearly helped borrowers with too much debt and lower
The average FICO score for those home buyers fell from 718 at
the end of 2012 to 651 at the end of 2015. In April, it was at 685 for for an
FHA purchase and 653 for a refinance.
Those are exactly the kinds of trends that help borrowers land
the loans they need.
And with current mortgage rates remaining near historic lows,
it's a great time to be in the market to purchase or refinance a home.
Mitch Strohm - To view the original article click here