Today's mortgage rates are low.
According to Freddie Mac's weekly Primary Mortgage Market Survey (PMMS), mortgage rates for fixed-rate mortgage products rose just one basis point (0.01%)¬†from the week prior, to 3.42 percent.
Rates for adjustable-rate loans increased as well, but at a faster pace: eight basis points to end up at an average of 2.76 percent.
Last week's¬†rise in adjustable mortgage rates doesn't bring rates for this product anywhere near recent highs, though. The 5-year adjustable rate mortgage (ARM) is still 0.33% lower than it was at the beginning of 2016.
Lower mortgage rates means lower mortgage payments, which makes it easier for home buyers using adjustable-rate mortgages to get mortgage-qualified.
Today's ARM mortgage rates are near the lowest in three years.Click to see today's rates (Dec 8th, 2016)
Freddie Mac's Primary Mortgage Market Survey shows average mortgage rates¬†up slightly from the week prior.
The survey asks 125 lenders nationwide to share¬†their individual mortgage rates and accompanying discount points for prime home buyers using conventional loans with a down payment of twenty percent or more.
A "prime" home buyer is one whose credit score is considered excellent; whose income is stable and adequate to manage monthly obligations; and, who is making a purchase of a single-family home.
The most recent survey results show:
Discount points are a one-time fee charged by your lender which is paid at closing.
1 discount point carries a¬†cost of¬†one percent of your mortgage principal balance. For instance, on a mortgage at the conforming mortgage loan limit of $417,000, 0.6 discount points would equate to¬†$2,502.
The above rates are based on 30-day mortgage rate locks. If your closing is not within thirty days, you may be subject to higher rates or fees.Click to see today's rates (Dec 8th, 2016)
Although 5-year ARM mortgage rates rose last week, they continue to be the lowest of all of Freddie Mac's reported rates.
This means that, for active home buyers, the "cheapest" path to homeownership is via the 5-year adjustable rate mortgage.
And, for many of them, it's the wisest. This is because of how an adjustable-rate works.
With an adjustable-rate mortgage, your rate is subject to change over the life of your loan --¬†however! --¬†it can only change¬†after the loan's initial "teaser" period has ended.
As the borrower, it's your choice how long your teaser period lasts.
The most common teaser periods for adjustable-rate mortgages are one year, five years, and seven years.
Therefore, if you know that you won't need your mortgage for more than, say, five years, it would make sense to consider a 5-year ARM.
First-time home buyers are often a good fit for adjustable-rate mortgages, as are households which change residences regularly.
Meanwhile, with ARM mortgage rates low, it's easier for buyers to qualify.
In order to qualify for a home loan, mortgage lenders consider your credit history; your down payment; and, your debt-to-income ratio (DTI), which describes how you manage your cash flow.
Your mortgage payment is considered part of your cash flow. So, with ARM mortgage rates down, and mortgage payments cheaper, your debt-to-income drops. This makes it easier to get mortgage-qualified.
One caveat: Adjustable-rate mortgages are not meant to be an affordability tool. Mortgage rates for an ARM can, and do, change. Sometimes, rates go down, but other times, rates go up. Home buyers who stretch a¬†household budget via¬†adjustable-rate mortgage create a potentially dangerous situation for when the loan's teaser period expires.
ARMs can be a terrific for some, but are definitely not for all.
Current mortgage rates are low, and adjustable-rate mortgages are leading the way. And, for many home buyers, ARMs may be a more sensible option as compared to the 30-year fixed-rate loan.
Get today's live mortgage rates now. Your social security number is not required to get started, and all quotes come with access to your live mortgage credit scores.Click to see today's rates (Dec 8th, 2016)
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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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)