Posted April 28, 2014Tweet
Mortgage rates today are lower as compared to last week, giving this season's home buyers a second chance at home affordability.
Rate shoppers are catching a break. For the third week out of four, mortgage rates have dropped. Rates are now near their lowest levels of the year.
Buying a home or refinancing one? It's a good time to compare today's lowest mortgage rates.
The prices of mortgage-backed securities (MBS) improved last week, which led U.S. mortgage rates lower. This is because mortgage rates are "made" in the MBS market.
When MBS prices rise, mortgage rates drop. Conversely, when MBS prices fall, mortgage rates rise.
There are several mortgage-backed security varieties. Each links to a different mortgage program type.
The Fannie Mae mortgage bond, for example, is tied to conventional mortgage rates for loans backed by Fannie Mae. There is a corresponding MBS issuance for Freddie Mac.
There's a specific MBS issuance for non-conventional loans, too -- it's the Ginnie Mae MBS.
Ginnie Mae bonds determine mortgage rates for FHA loans backed by the Federal Housing Administration; VA loan guaranteed by the Department of Veterans Affairs; and, USDA loans guaranteed the U.S. Department of Agriculture.
Last week, the price of the Fannie Mae 4.0% coupon bond rose 57 basis points. The net effect on mortgage rates was a 1/8% improvement between Monday and Friday. Ginnie Mae bonds made a similar improvement.
Rates for all mortgage rates are near their lowest levels of the year.
This year's mortgage rates are defying the experts.
At the start of the year, Wall Street predicted that rates would rise into the 5s; and that refinance opportunities would go scarce. One-third through the year, however, Wall Street is being shown to be wrong.
Mortgage rates have been on a slow, steady decline since the start of the year. They're down as much as 0.375 percentage points.
On a $300,000 mortgage at today's mortgage rates, home buyers and homeowners pay $50 less each month as compared to mortgage rates from January 1. Home affordability is improving.
Refinance opportunities are opening as well -- specifically for homeowners with an existing FHA-backed mortgage. FHA Streamline Refinances are in high demand.
The FHA Streamline Refinance is a special refinance program which waives many of the traditional verifications which accompany a refinance. According to the program's official guidelines, with the FHA Streamline Refinance, there is no income verification, no credit score verification, and no home appraisal required.
One of the FHA Streamline Refinance's only requirements is that the refinancing homeowner must save at least five percent monthly via a refinance. It's known as the "Net Tangible Benefit".
As an illustration, if your current FHA mortgage payment is $1,000 monthly, you cannot refinance unless your new FHA mortgage payment will be $950 or less. It's easier to meet this requirements when mortgage rates are low, like they are today.
However, FHA-backed homeowners have a second opportunity, too.
Because home values are rising in many U.S. markets, tens of thousands of FHA-backed homeowners have sufficient home equity to refinance away from the FHA and into a conventional loan via Fannie Mae or Freddie Mac.
There are two reasons to consider such a move. The first is that mortgage insurance costs on a conventional loan are often lower than for a comparable FHA-backed loan. This can save hundreds of dollars monthly.
The second reason is that, for all new FHA loans, mortgage insurance is required for at least 11 years. With a conventional loan, though, mortgage insurance is only required until a homeowner's equity reaches 20%.
That makes today an ideal time to refinance away from the FHA, into a conventional loan instead. The long- and short-term costs are likely to be lower.
Mortgage rates will be volatile this week. There economic release calendar is full; plus, the Federal Open Market Committee is meeting for its third scheduled time this year.
Any time the Fed meets, mortgage rates can change quickly. This week, though, with the added influence of the Non-Farm Payrolls report, it will be hard for rate shoppers to pin down the lowest rate possible.
Mortgage rates are expected to change several times daily.
The week's calendar looks like this :
Note that the Federal Open Market Committee will adjourn at 2:00 PM ET Wednesday and issue its customary press statement at that time. The Fed is expected to continue its tapering of its stimulus programs; and to announce that rates are expected to stay low until mid-2015, at least.
The Fed rarely delivers the precise message Wall Street expected, though. The distance from which the central banker deviates from expectations will determine how fast and by how much mortgage rates will change. Unfortunately, we can't know if mortgage rates will rise or fall.
A similar pattern is expected for Friday's job report.
Mortgage rates are falling, but low rates may not last. The Federal Reserve is meeting last this week and the Non-Farm Payrolls report is set for release. Both can affect rates negatively.
Compare today's mortgage rates and see what you can save. Rates are available online at no cost, with no obligation to proceed, and with no social security number required to get started.
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.