MORTGAGE RATE FORECAST FOR FEBRUARY 2016
With 2016 one month down, mortgage rates continue to defy Wall Street predictions. According to Freddie Mac's weekly mortgage rate survey, 30-year mortgage rates dropped again last week and, at 3.79%, on average, rates are now down 25 basis points (0.25%) since the start of the year. It's a good time to shop for a home loan.
As February begins, conventional rates are in the high-threes for buyers paying points at closing; and purchase and refinance rates for FHA and VA loans are as much as a quarter-point lower. Because of how mortgage rates have dropped, if you could afford a $400,000 home in December, today, you can afford a home for $411,000. That's a big increase but it's not just home buyers whom are benefitting. Millions of U.S. homeowners are now in the money to refinance. To be "in the money", your mortgage rate must be more than 150 basis points (1.5%) above today's rates; and, your loan must more than 10 years remaining with a balance larger than $50,000..Even if you've already refinanced or recently purchased a home, take a look at today's low rates. There's money to be saved and closing costs can be paid by your lender.
30-YEAR MORTGAGE RATES AVERAGE 3.79%
The average conventional 30-year fixed rate mortgage is 3.79%, according to Freddie Mac's Primary Mortgage Market Survey (PMMS). The Freddie Mac rate is available to "prime" borrowers paying an accompanying 0.6 discount points at closing. Discount points are a one-time loan cost, where one discount point carries a cost equal to one percent of your first mortgage loan size amount.
For example, 1 discount point on a Miami, Florida loan at the 2016 conforming loan limit of $417,000 would carry a cost of $4,170 to be paid at closing.
Discount points, which are typically tax-deductible, can be paid with cash or they can be added to your loan size for you. Note, though, that Freddie Mac's weekly mortgage interest rate survey applies to conforming loans and conventional mortgage rates only. FHA mortgage rates and VA mortgage rates are not surveyed as part of the report; nor are mortgage rates for USDA loans. Rates for these other loan types are even lower.
All of this makes it easier for today's refinancing homeowners to qualify for streamlined loans such as the FHA Streamline Refinance, the VA Streamline Refinance, and the USDA Streamline Refinance. Streamlined refinance loans can close in as few as 30 days because of reduced paperwork requirements and appraisal waivers. Streamlined refinances are simpler for banks to underwrite and approve. Mortgage rates remain below the psychologically-important 4 percent figure.
Loans now cost just $465 monthly for every $100,000 borrowed, excluding escrows for taxes and insurance; and, private mortgage insurance (PMI), where applicable. (Editor's Note: PMI is neither good nor bad - The Mortgage Reports)
It should be noted, however, that mortgage rates may not stay low for long. Rates change quickly with the economy, and with shifts in market sentiment.
Mortgage-backed securities (MBS) -- the Wall Street asset upon which mortgage rates are "made" -- have been erratic of late, which puts rates on shaky ground. MBS pricing is currently responding to influences on the economy, including the Federal Reserve, the jobs market, and developments in nations abroad (i.e.; China).
In February, then, mortgage rates could rise into the fours and stay there (finally); or, shoppers may find them retreating farther. Your luck with the month's mortgage rates will be part-economy, part-psychology.
Source: Dan Green, Mortgage Reports
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