Will current mortgage rates continue to fall?
One week after making its biggest one-week improvement in more than a year, the average conventional 30-year fixed mortgage rate has moved below 4 percent for the first time in 2014.
The 30-year mortgage rate now averages 3.97% nationwide.
For renters and active home buyers, this month's drop in rates is helping to keep U.S. homes more affordable at a time during which home values continue to climb.
And, for existing homeowners, mortgage rates in the 3s make it easier to refinance into lower monthly payments.
There are more than 5 million homeowners currently "in the money" to refinance to lower rates. If you think you may be among them, take a look at today's mortgage rates while they're still low.
Freddie Mac's weekly mortgage rate survey of more than 100 banks shows that the average 30-year fixed rate mortgage rate fell 15 basis points (0.15%) last week to an average 3.97 percent nationwide.
The drop follows a seven-basis point mortgage rate reduction during the week prior, raising the 2-week improvement to twenty-two basis points.
This is the most that mortgage rates have dropped since September 2012 -- the month in which the Federal Reserve first introduced its mortgage-rate suppressing stimulus program known as QE3.
Conventional 30-year mortgage rates are below 4 percent for the first time in 16 months.
15-year mortgage rates are also making new lows.
The average conventional 15-year fixed-rate mortgage rate fell 12 basis points (0.12%) to reach 3.18%, which is the best rate of 2014 and the lowest since June of last year.
Meanwhile, it's not just conventional mortgage rates which are low. Mortgage rates for FHA loans and VA loans have been dropping, too, and rates for both loan types undercut their conventional mortgage counterparts routinely.
According to Ellie Mae's most recent Origination Insight Report, FHA mortgage rates average approximately 25 basis points (0.25%) lower than comparable conventional financing; and VA mortgage rates average approximately 37.5 basis points (0.375%) lower.
In today's market, VA loan borrowers may receive rates as low as 3.25% with an equally low APR.
With 30-year mortgage rates beneath 4 percent, and 15-year mortgage rates nearing the 2s, there are millions of U.S. homeowners eligible for refinance.
Plus, with "no-appraisal" refinances available, including the FHA Streamline Refinance, the VA Streamline Refinance, and HARP, the refinance eligibility window is currently huge nationwide.
A brief list of homeowners who should consider a refinance at today's low rates include the following:
Mortgage market data shows that there are upwards of 4 million U.S. homeowners whose current mortgage rates are north of five percent. There are likely millions more whose rates are between 4.50% and 5.00 percent.
Each of these homeowners should at least explore the possibility of a refinance -- especially because zero-closing cost mortgages can remove the risks associated with "recouping closing costs" or finding your "break-even". With a zero-closing cost mortgage, there is no break-even point.
Note that mortgage rates for a zero-closing cost mortgage rates are slightly higher than Freddie Mac's weekly published rate.
Rising home values have provided an opportunity for homeowners to get rid of their monthly mortgage insurance. Until now, however, these windows had been open to homeowners with traditional mortgage insurance only.
Now, with mortgage rates down, homeowners with alternate forms of mortgage insurance can refinance to lower rates and be rid of extra payments to premium. One such insurance type is lender-paid mortgage insurance (LPMI).
For mortgages with LPMI, mortgage lenders don't collect monthly mortgage insurance. Rather, the mortgage insurance is built-in to the mortgage rate itself, which is increased at the time of closing.
For example, a mortgage with a rate of 5% and which carries LPMI may see the rate raised to 5.25% to account for a loan's high loan-to-value (LTV). Rather than paying mortgage insurance, the homeowner pays an extra 25 basis points for as long as the loan is active.
Today is a good time to refinance out of loans with mortgage insurance and LPMI. Mortgage rates are low.
For homeowners with an FHA mortgage, there are two opportunities to refinance.
The first opportunity is via the FHA Streamline Refinance program which waives most verifications and documentation required for a refinance. This can include waiving home appraisals, proof of income, and pulling of credit.
However, the FHA requires that homeowners using its flagship refinance program reduce their payment by at least 5 percent. When mortgage rates drop, meeting this "Net Tangible Benefit" requirement is easier.
Another reason FHA homeowners should explore a home loan refinance is because, with home values rising, many FHA-backed homeowners are now eligible to cancel FHA MIP via refinance.
Similar to FHA homeowners, falling mortgage rates are giving VA-backed homeowners an opportunity to refinance to current mortgage rates. This is because the VA Streamline Refinance program requires refinancing homeowners to reduce their annual mortgage rate and monthly payment.
With current VA mortgage rates in the mid- to low-three percents, the majority of U.S. homeowners with an existing VA-backed mortgage now meet the program's "net tangible benefit" requirement.
VA home loans require no mortgage insurance and appraisals are waived on a refinance. Regardless of whether you're underwater on your home loan, if your home's existing loan is a VA loan, you may be eligible to reduce your rate via the VA Streamline Refinance.
It's more than mortgage rates that are dropping in today's mortgage market -- lender loan requirements are dropping, too.
Nearly 25% of banks report that lending standards for prime mortgage borrowers are "looser"; and, Ellie Mae statistics show that, for closed loans this year, average FICO scores are lower and average LTVs are higher.
If you've been turned down for a mortgage since 2008, it may make sense to apply again.
Lenders are reducing minimum credit scores to get approved for a loan; home values are rising, which has replaced lost home equity; and, the FHA and Fannie Mae have both revised their guidelines for consumers with a recent "significant derogatory credit event".
If you've had a bankruptcy, foreclosure, or short sale in your past, lenders will take your application for a mortgage after just 12 months.
There's no reason to carry a mortgage rate above today's market standard. Re-apply to refinance and see what you're eligible today.
Current mortgage rates are at their best levels of 2014. It's an excellent time to get a mortgage rate quote and see for what you'll qualify -- especially because rates can advance quickly and without warning.
Get a live rate quote now. Mortgage rates are available for free with no social security number required to get started and with no obligation to proceed.
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.
Ron Z. Real Estate Agent
I am a full-time Realtor and I look forward to daily updates from The Mortgage Reports. The advice is useful and the insight is important. Thank you!
The Mortgage Reports is doing the BEST mortgage reporting of anyone out there!
Sandi C. Customer Service Representative
The Mortgage Reports has been extremely helpful in educating me about mortgages, and what is available. Thank you for all that you do!
2016 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)