Mortgage Rates Remain Low While Mixed Reports Flourish

After several positive housing reports released this month, the National Association of Realtor's Pending Home Sales Index decreased 3.5% in December. Since it tends to be a slow month for housing due to several holidays, this report should not come as a shock. According to the Commerce Department, New Home Sales were also down 2% for the month of December. For another week, while mixed reports flourish, mortgage rates have remained low and stable according to Freerateupdate.com's weekly survey of wholesale and direct lenders. Borrowers are still looking at all time low mortgage rates with 30 year fixed conforming mortgage rates at 3.500%, 15 year fixed mortgage rates at 2.875% and 5/1 adjustable mortgage rates at 2.250%. Good credit is essential in order to receive these lowest mortgage rates with 0.7 to 1% origination fee. Last week, the Federal Housing Finance Agency's Home Price Index showed an increase of 1% from October to November on a seasonally adjusted basis. Any increase needs to be taken seriously by potential home buyers who want to get in at the lowest possible home price.

FHA may see an increase in mortgage loans now that the higher loan limit is in place for borrowers who would otherwise need to obtain a jumbo mortgage. Current FHA 30 year fixed mortgage rates are at 3.250%, FHA 15 year fixed mortgage rates are at 2.750% and FHA 5/1 adjustable mortgage rates are at 2.750%. FHA mortgage rates are not risk based and, therefore, are not affected by credit scores. Credit scores are used only to determine the required down payment which is either 3.5% with a score as low as 580 and 10% with scores between 500 and 580. FHA mortgages still allow down payment assistance from several sources such as approved gifts and housing grants and loans. Co-borrowers can also be used to strengthen the mortgage application. FHA offers several different types of loan programs and options which make up for the higher FHA closing costs (APR) which is caused by the upfront mortgage insurance premium and other FHA fees.

Once again, jumbo 30 year fixed mortgage rates dropped back down to 4.125%, a decrease of .125%. Jumbo 15 year fixed mortgage rates are at 3.375% and jumbo 5/1 adjustable mortgage rates are at 2.500%. It is necessary for borrowers to have excellent credit to secure these lowest jumbo mortgage rates with 0.7 to 1% origination fee. Stricter guidelines for jumbo mortgage approval are set by lenders, who do so in order to reduce their risk, since these are considered portfolio loans. Lenders look for long term, steady employment that must be fully documented and verified. Assets, although not necessarily cash, must be substantial to cover the larger down payment requirements and additional months of reserves that are necessary.

Since mortgage rates move in the opposite direction of MBS prices, it is not a surprise that mortgage rates have remained intact. MBS prices were mostly up this week as investors turned to the safety of U.S. debt. European financial talks, that are not producing any definite results, are keeping investors on the edge. The Fed's announced last week that they plan to keep rates low through 2014 which is longer than anyone expected. Durable Goods rose higher than expected in December. Jobless claims increased according to the Labor Department, but was close to predictions. A weaker than expected GDP report disappointed investors, but Consumer Sentiment and Personal Income was higher than predictions. Core PCE price index rose 0.2% in December. The flow of mixed reports has investors cautious, but on the other hand, is keeping mortgage rates down.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders' rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard .07 to 1% point origination fee.

Written by Ed Ferrara