Mortgage rates -- they've climbed for two straight weeks, but remain ultra-low and accessible for buyers and refinancing households.
According to Freddie Mac, mortgage rates climbed 7 basis points (0.07%) this week, and are holding beneath 3.75% for the 13th straight week. Rates have steadily declined since the New Year.
For today's home buyers, falling mortgage rates means a rise in buyer purchasing power. You can afford roughly 5% more home as compared to the start of the year.
For refinancing households, the news is just as good.
If your current mortgage is backed by the FHA or the Department of Veterans Affairs, you're going to find it easier to meet the "net savings" requirements of those programs; and, for homeowners with conventional loans, it's an excellent time to consider a rate-and-term refinance to lower rates.Click to see today's rates (Jul 30th, 2016)
Each week, government agency Freddie Mac surveys 125 banks for its Primary Mortgage Market Survey (PMMS), a recap of the current "going rate" for three common mortgage loans.
The survey covers the conventional 30-year fixed-rate mortgage, 15-year fixed-rate mortgage, and 5-year adjustable-rate mortgage (ARM).
Rates for each of the three products are lower as compared to one week ago.
Freddie Mac rates are available to prime mortgage borrowers where "prime" is defined as having excellent credit scores; ample, verifiable income; and, plans to purchase single-family home as a primary residence.
Note that each of the above quoted rates comes with accompanying discount points.
Discount points are a one-time, upfront closing cost which "discount" the offered mortgage rate to something lower.
One discount point comes at a cost of one percent of your borrowed amount such that a Seattle home buyer paying 1 discount point on a loan at the local mortgage loan limit of $517,500 should expect an additional closing fee of $5,175.
The IRS treats discount points as "prepaid mortgage interest" so, in many cases, discount points are tax-deductible for borrowers who opt to pay them.
For loans without discount points, mortgage rates are often higher.
In general, one discount point will discount your mortgage rate by 25 basis points (0.25%). Borrowers choosing to waive discount points, therefore, should expect this week's 30-year mortgage rates to be closer to 3.875%.
Rates do not apply to investment properties nor to the purchase of multi-unit homes.
Freddie Mac's surveyed rates also do not apply to VA loans or FHA loans which are backed by the Department of Veterans Affairs and the Federal Housing Administration, respectively.
Mortgage rates for VA loans and FHA loans are typically lower than what's published by Freddie Mac -- sometimes by as much as 40 basis points (0.40%).Click to see today's rates (Jul 30th, 2016)
This year's mortgage rates -- at least so far -- have defied "expert predictions". Rates had been projected to be north of four percent by now, but they've gone the other way.
Since the New Year, 30-year mortgage rates have dropped, as have rates for all other loan types.
With home values climbing, today's market represents an excellent opportunity to refinance.
If you're currently paying mortgage insurance, a refinance could cause your mortgage insurance to cancel; and if your loan is backed by the FHA, you may able to cancel FHA MIP forever.
For everyone else, even small mortgage rate savings will add up. Homeowners are expected to save more than $5 billion on their refinanced mortgages this year.
Meanwhile, there's no promise that mortgage rates will keep this low.
The conditions that have lowered rates to where they are could reverse at any time, which would result in higher rates.
Consider the series of events that conspired to drop mortgage rates to the 3s:
These three developments, among other causes, have resulted in a drop in commodity prices, including for the price of oil which is also running below analyst expectations.
Low oil prices have stifled inflation with the U.S. economy, creating potentially deflationary environment -- especially with wage growth weakness and uncertainty within the labor markets.
However, with the global economy so inter-connected, it will only take one strong report to flip the switch on market sentiment. A huge jobs report from the U.S.; a rapid growth data point from China; a sign that the Eurozone is busting out -- any of these events could reverse the flow on rates.
Mortgage rates are low today. Tomorrow, they may not be.
If you've been considered whether now is the time to refinance your loan, at least take a look with your lender. You may even want to refinance for the sake of refinancing, minimizing your risk and costs using a zero-closing cost loan.
Zero-closing cost mortgages are an excellent way to ride the market lower while limiting your exposure to future increases to rate.
Freddie Mac puts current mortgage rates in the 3-percent range, and there's little risk of rates hitting four percent anytime soon. However, what if they do? What will be your plan?
Take a look at today's real mortgage rates now. Your social security number is not required to get started, and all quotes come with instant access to your live credit scores.Click to see today's rates (Jul 30th, 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)