January 9th, 2016 2:00 PM by Chris Styner
January 9, 2016
by Dan Green
After a brief, 1-week burst higher, current mortgage rates are back below 4%.
According to Freddie Mac's weekly survey of more than 100 mortgage lenders nationwide, conventional 30-year fixed rate mortgages dropped 4 basis points (0.04%) last week from the week prior.
30-year conventional mortgage rates now average 3.97% nationwide for borrowers willing to pay 0.6 discount points at closing.
Different from the 30-year loan, mortgage rates for the conventional 15-year fixed-rate mortgage rose 2 basis points (0.02%) last week to reach an average 3.26% nationwide with an accompanying 0.5 discount points.
5-year ARM mortgage rates also climbed, moving 1 basis point (0.01%) to 3.09%.
However, if you're looking for today's lowest possible rates, you may want to revisit the VA loan. VA mortgage rates are the lowest available.
With today's low mortgage rates, home buyers can purchase more house. Plus, the more-than-6.5-million households potentially eligible to refinance could lock-in large, long-term savings.
It's an excellent time to comparison shop your home loan.
Click to see today's rates (Jan 9th, 2016)
It's been a bumpy few months for mortgage rate shoppers.
Freddie Mac's weekly mortgage rate survey shows a 4 basis point (0.04%) decrease in the average 30-year fixed rate interest rate to 3.97% nationwide.
The decrease pulls the 30-year rate back below four percent (where it lived for only one week) and makes it easier for buyers and refinancing households to get mortgage-qualified.
As compared to last year, rates are higher by 24 basis points (0.24%), raising borrowing costs by $13 per $100,000 borrowed. Combine this with last year's average home price increase of more than five percent, and today's homes are less affordable to buyers than they were a year ago.
The size of a home downpayment-- even when using a low-downpayment loan such as Fannie Mae's 3% down HomeReady™ mortgage -- increases as the value of a home increases. This means you need to save more money to buy the same home.
Add in the cost of closing fees and buying a home can be downright expensive. Thankfully, mortgage lenders make zero-closing cost mortgages available to borrowers who ask.
A zero-closing cost mortgage is a mortgage for which all closing costs are paid by the lender.
In general, a $250,000 mortgage can be converted to "zero-closing cost" by adding a quarter-percentage point increase to the interest rate.
Doing a zero-closing mortgage adds approximately $15 to a monthly payment for every $100,000 borrowed. The amount saved will depend on your closing costs, which vary by state.
Note, though, that you may be eligible for lower rates than what Freddie Mac's survey reports. This is because the Freddie Mac survey covers conventional loans only.
Rates for other loan types, including VA, USDA, FHA, and jumbo loans are different from Freddie Mac's survey -- and they're typically lower.
VA mortgage rates are currently three-eighths of a percentage point (0.375%) lower than a comparable loan via Fannie Mac or Freddie Mac, and rates for FHA loans beat conventional loans, too.
The typical FHA mortgage rate is now roughly 12.5 basis points (0.125%) below the conventional rate and, for homeowners with credit scores below 740, the FHA loan may be a better option low-downpayment option as compared to the Conventional 97.
FHA mortgage insurance premiums (MIP) were lowered earlier this year to help with home affordability.
In November of this year, 30-year mortgage rates put together their worst one-month performance since late-2013. Borrowers are still feeling some of those effects.
Higher rates through that month brought higher monthly payments and higher payments cause a borrower's debt-to-income (DTI) to increase.
An increase to your DTI can make it tougher to get approved on a home loan; or, to qualify for a home loan refinance.
Debt-to-income calculations are among the most important pieces of a mortgage approval.
When mortgage rates rise, it also lowers a buyer's maximum home purchase price. This is because the buyer becomes restricted by payment and must lower its mortgage size in order to keep the same monthly payment.
Use our 3-in-1-mortgage calculator to calculate your payment.
During the last week of October, for example, a $1,391 payment would cover a mortgage for $300,000. Today, with mortgage rates up close to one-quarter percentage point, that same loan costs $1,427 per month, plus taxes and hazard insurance.
For every one percentage point increase in mortgage rates, a buyer's maximum home purchase price falls by approximately 11 percent.
Today's interest rates are back below 4 percent, but don't wait to see what happens next. Take a look at today's live mortgage rates and see what's possible for your home and your loan,.