Posted November 30, 2012Tweet
Mortgage rates didn't make a new all-time low this week, but they remain steadfastly low.
According to Freddie Mac's weekly Primary Mortgage Market Survey (PMMS), the national 30-year fixed rate mortgage rate climbed 1 basis to point to 3.32%, on average, nationwide. The rate is available to borrowers willing to pay 0.8 discount points plus a complete set of closing costs.
30-year fixed rate mortgage rates rose 0.01 percentage point to 3.32% this week -- an ultra-low mortgage rate by historical and current standards.
For example, one year ago, the average 30-year fixed rate mortgage rate was 4.00 percent and, at the time, homeowners said "rates would never go lower". Yet, they did go lower. Apart from a one-week stint in March 2012, mortgage rates have been under four and headed toward 3.
That said, you may not want the Freddie Mac published rate because it comes at a cost. Freddie Mac's mortgage rates are always published with the assumption that mortgage applicant will want to pay discount points to the bank.
This week, to lock Freddie Mac's 3.32% rate requires an average of 0.8 discount points to be paid at closing plus all of the typical closing costs that can accompany a home loan.
Paying 0.8 discount points on a $100,000 loan adds an $800 closing cost. On a $200,000 loan, it adds $1,600 in closing costs.
On a loan at the 2013 jumbo loan limit of $625,500 in places like Loudoun County, Virginia; Bethesda and Potomac, Maryland; and Los Angeles, California, 0.8 discount points adds $5,004 in closing costs.
The high cost for discount points is one reason why homeowners tend to choose low- or zero-closing cost mortgages instead. It saves money up-front at closing.
With a low-closing cost mortgage, lenders remove the required discount points in exchange for giving slightly higher mortgage rate. This means that loan costs are smaller up-front, but slightly larger month-after-month as a result of the higher rate.
With a zero-closing cost mortgage, all closing costs are waived -- discount points and closing costs. A borrower's loan balance does not increase but the offered mortgage rate is not as low as with a full-cost home loan.
Zero-closing cost mortgages have been very popular through the Refinance Boom because homeowners like the idea of getting a lower rate and payment, and paying absolutely nothing to make it happen.
Via a zero-closing cost mortgage, homeowners can save good money with no costs -- out-of-pocket or otherwise. Zero closing costs means exactly that. The alternative is to pay some costs and save a little but more.
In today's falling mortgage rate environment where people can (and do!) refinance frequently, zero-closing cost mortgages are a winning bet. Paying closing costs can be expensive.
Freddie Mac's weekly mortgage rate survey showed the following average mortgage rates nationwide :
The Freddie Mac survey does not differentiate between purchase mortgages and refinance ones. Mortgage rates may be higher or lower depending your loan's unique characteristics.
Furthermore, specialized loan types including the Delayed Financing program for cash buyers, and loans for investors with more than 4 properties financed may be assigned slightly higher mortgage rates to account for slightly higher lender risk.
Lastly, these rates are for conforming mortgages only. FHA, VA and USDA mortgage rates follow different pricing models, as do jumbo and super jumbo home loans. All rates are better since last week.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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2014 Conforming & FHA Loan Limits
Mortgage loan limits for every U.S. county,
as published by Fannie Mae & Freddie Mac, and the FHA.