Mortgage Rates Remain Low Despite Economic Uncertainty

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ZillowThe weekly mortgage rate chart illustrates the average 30-year fixed interest rate in six-hour intervals.

By Lauren Braun

Mortgage rates for 30-year fixed loans rose slightly this week, with the rate borrowers were quoted on Zillow at 3.61 percent, up two basis points from last week.

The 30-year fixed mortgage rate rose to 3.63 percent on Friday and hovered there before retreating.

“Despite minor fluctuations, mortgage rates were roughly flat last week, holding near nine-month lows,” said Erin Lantz, vice president of mortgages at Zillow. “We expect more volatility this week with important GDP [gross domestic product] data on Friday and, more significantly, a Fed meeting mid-week which should provide the first read on the Central Bank’s reaction to recent financial turmoil.”

The 15-year fixed mortgage rate was 2.81 percent. For 5/1 ARMs, or adjustable-rate mortgages, the rate was 2.77 percent.

Check Zillow for rate trends and up-to-the-minute mortgage rates for your state, or use the mortgage calculator to calculate monthly payments at the current rates.

 

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30-Year Mortgage Rates Continue to Trend Lower

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ZillowThe weekly mortgage rate chart illustrates the average 30-year fixed interest rate in six-hour intervals.

By Lauren Braun

Mortgage rates for 30-year fixed loans fell this week, with the current rate borrowers were quoted on Zillow at 3.59 percent, down nine basis points from last week.

The 30-year fixed mortgage rate fell throughout the week, reaching 3.56 percent on Monday before rising slightly.

“Mortgage rates fell last week to their lowest levels since last April on the heels of falling oil prices and continued global turmoil surrounding growth worries in China,” said Erin Lantz, vice president of mortgages at Zillow. “With little U.S. economic data on the docket this week, more ‘flight-to-quality’ should dominate headlines until markets find a bottom.”

Additionally, the 15-year fixed mortgage rate was 2.79 percent. For 5/1 ARMs, or adjustable-rate mortgages, the rate was 2.66 percent.

Check Zillow for mortgage rate trends and up-to-the-minute rates for your state, or use the mortgage calculator to calculate monthly payments at the current rates.

 

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Mortgage Rates Fall Below 3.7%

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ZillowThe weekly mortgage rate chart illustrates the average 30-year fixed interest rate in six-hour intervals.

By Lauren Braun

Mortgage rates for 30-year fixed home loans fell this week, with the current rate borrowers were quoted on Zillow at 3.68 percent, down 13 basis points from last week.

The 30-year fixed mortgage rate fell steadily until Friday, then hovered around the current rate for the rest of the week.

“Mortgage rates fell last week despite strong U.S. economic data as investors sought safe assets in the wake of stock market turmoil in Asia,” said Erin Lantz, vice president of mortgages at Zillow. “With rates near their lowest levels since late October, we expect rates to move cautiously upward this week.”

Additionally, the 15-year fixed mortgage rate was 2.87 percent. For 5/1 ARMs, or adjustable-rate mortgages, the rate was 2.97 percent.

Check Zillow for mortgage rate trends and up-to-the-minute rates for your state, or use the mortgage calculator to calculate monthly payments at the current rates.

 

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Mortgage Rates Still Low at 3.74%, But Volatility Likely

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ZillowThe weekly mortgage rate chart illustrates the average 30-year fixed interest rate in six-hour intervals.

By Lauren Braun

Mortgage rates for 30-year fixed loans fell this week, with the rate borrowers were quoted on Zillow at 3.74 percent, down seven basis points from last week.

The 30-year fixed mortgage fell to 3.78 percent on Thursday, then hovered there before dropping to the current rate.

“Mortgage rates fell early this week as financial markets returned from the New Year’s holiday to a collapse in Asian equities, which pushed capital flows to safe assets including U.S. mortgage bonds,” said Erin Lantz, vice president of mortgages at Zillow. “We expect continued volatility this week leading up to Wednesday’s publication of the December Federal Open Market Committee meeting minutes and Friday’s all-important jobs report.”

Additionally, the 15-year fixed mortgage rate was 2.96 percent. For 5/1 ARMs, or adjustable-rate mortgages, the rate was 2.97 percent.

Check Zillow for mortgage rate trends and up-to-the-minute rates for your state, or use the mortgage calculator to calculate monthly payments at the current rates.

 

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Mortgage Rates Only Slightly Higher at 3.81% in Quiet Week

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ZillowThe weekly mortgage rate chart illustrates the average 30-year fixed interest rate in six-hour intervals.

By Lauren Braun

Mortgage rates for 30-year fixed loans rose this week, with the rate borrowers were quoted Tuesday on Zillow at 3.81 percent, up six basis points from last week.

The 30-year fixed mortgage rose throughout the week, reaching 3.86 percent on Saturday before falling Monday.

“Mortgage rates increased modestly early last week, mostly due to market anomalies associated with the holiday-shortened week,” said Erin Lantz, vice president of mortgages at Zillow. “We expect another quiet couple of days in mortgage markets this week.”

Additionally, the 15-year fixed mortgage rate was 3.02 percent, and for 5/1 ARMs, the rate was 3.05 percent.

Check Zillow for mortgage rate trends and up-to-the-minute rates for your state, or use the mortgage calculator to calculate monthly payments at the current rates.

 

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Will an Adjustable Rate Mortgage Cost an Arm and a Leg?

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B5JD2X A magnifying glass highlights fixed interest rate and adjustable interest rate mortgage loans as part of a real estate co
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By Geoff Williams

If you’re buying a house soon, you may be mulling over the idea of getting an adjustable-rate mortgage. Or you were, until you heard about the Federal Reserve’s recent decision to raise interest rates a quarter point. That likely put a chill on many homeowners’ desires to have an adjustable-rate mortgage, also known as an ARM.

If you currently have an ARM, you might be in full-blown-panic mode, wondering if your interest rate is going to climb soon.

“My voicemail and email has been inundated by my clients, friends and partners all asking the same question, ‘What should I do about my ARM mortgage and when?'” says Drew Grandi, a loan originator with Wintrust Mortgage in Massachusetts.

What should you do? It really depends. An ARM can be a terrific strategy for paying a mortgage, or a terrible one. Before you get one, or get rid of one, you need to think about how you want to proceed.

What Is an ARM?

It’s a home loan with a fixed interest rate, usually for five years — but after that, it can adjust every year. (That’s why you’ll often hear ARMs referred to as a 5/1 ARM, although you could have a fixed interest rate for a different period, like a 7/1 ARM or 10/1 ARM.)

After those five or more years are up, the interest rate can go up or down for the duration of your mortgage.

Because the interest rate could go up, it can be risky to have an adjustable rate. Nobody wants an ARM to cost them an arm and a leg.

So why get an ARM if your monthly mortgage payment can turn on you like that? Because the fixed rate for those five years or so is lower than a traditional fixed mortgage rate. It hasn’t been all that much lower in recent years, of course, since all mortgage rates have been low. Still, even a percentage point can reduce a mortgage payment enough to save a homeowner thousands of dollars in the long run.

How High Can an ARM Go?

While your monthly mortgage payment can adjust every year to a higher and higher rate, there is a limit to how much financial pain you’ll endure.

“There are protective caps, so the loan cannot adjust higher than the designated annual cap or lifetime overall rate cap,” says Staci Titsworth, regional manager of PNC Mortgage in Pittsburgh. This is looked upon as insurance against risk.

“Most ARMs are capped so that your interest rate will not exceed more than 5 percent above your original rate,” Grandi says.

That doesn’t sound so bad, but it can add up. Grandi offers an example of the homeowner who has a 5/1 ARM at 3 percent on a $300,000 mortgage. That would mean you’re paying $1,264.81 a month for the first five years, he says. If interest rates shot up, the most you would pay is 8 percent on that $300,000, which would mean a max monthly payment of $2,201.29, or about $936 more than your original payment.

If you are thinking about an ARM, Titsworth suggests having the loan officer run a few examples of payments, including the worst-case-scenario payment. It may be eye-opening.

What if You Have an ARM Now?

Don’t panic, Grandi says. “Everyone currently in an ARM should not necessarily be hounding their mortgage expert to refinance into a fixed-rate mortgage,” he says.

In fact, if you have a low-rate ARM now and you refinance into a 30-year fixed-rate mortgage, you’d likely pay around 4 percent and your monthly payment would jump a little. With that previous $300,000 ARM example, Grandi says, the homeowner’s payment would go up less than $200 a month.

That may well be worth it to have the comfort of knowing you have a fixed mortgage payment. But if you’re planning to move in the next couple of years, you’re probably better off keeping the ARM. That’s because one of the biggest factors in whether you should get an ARM is how long you plan to live in your house. Generally, if you’re going to live in your home for a short time before selling it, an ARM is considered a financially shrewd move.

“I’m a big believer in ARM loans and have one now,” Titsworth says. “Adjustable rate mortgages are a good option for consumers that have a shorter-term need, and also those that are comfortable with a little risk,” she adds.

Who Shouldn’t Get an ARM?

Do what you want, but if you’d like some general rules of thumb, there are three types of homeowners who should likely avoid an ARM.

First-time homebuyers. Ali Vafai, president of The Money Source, a national correspondent lender and mortgage loan servicer on New York’s Long Island, says first-time homebuyers or those with little down payment should not choose ARM loans. Since rates are near historic lows today, he says it’s very likely rates will be higher in five years and payments would increase after the fixed period. Even if you’re not planning to stay very long, maybe you’ll discover you hate moving and and realize you don’t want to go anywhere.

— People on a tight budget. So you scraped up your down payment, barely, and you figure you can afford to live in a house if you pare back your budget a bit. It sure doesn’t sound like you would do well if, in five years, your monthly mortgage payment shot up a couple hundred dollars a month.

— Natural-born worriers. As has been duly noted, ARMs are a risk. Before you get an ARM, ask yourself some risk-related questions, Grandi suggests.

For instance, when you’ve been living in your home for two years, will you suddenly have sleepless nights because you aren’t sure what your mortgage payment will be in three years?

“Do you expect continued doom and gloom for the United States’ economy with unemployment increasing and inflation staying low?” Grandi asks.

In other words, if you a worrier, the ARM is probably not for you.

Titsworth agrees. She loves the ARM, though, and points out what isn’t often emphasized: When your fixed rate ends and it adjusts, your monthly payment doesn’t necessarily have to go higher. “It’s possible the rate could drop,” she says.

Still, all in all, “ARM loans are typically not the product of choice for someone that believes they will be in their home long term and wants [the] peace of mind of knowing what their payment will be,” Titsworth says. “The long-term fixed rates come with less risk and therefore a higher rate.”

 

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It Could Be a Sweet 2016 for Homebuyers

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By Scott Sheldon

The Federal Housing Administration continues its mission to help consumers realize the dream of homeownership. In today’s mortgage lending environment, there are three main types of loan options available for borrowers — conventional, FHA and jumbo loans. Of the three, FHA mortgages are significantly more flexible, especially in the following areas:

  • Higher debt ratio allowance.
  • 3.5 percent equity.
  • Lower credit scores may qualify.
  • Spotty credit histories may be acceptable.

The fact that the FHA raised its loan limits in 188 counties nationally speaks to a broader theme that there is reinvigorated demand for housing, both in terms of home sales and refinancing. For example, in California’s Sonoma County, the Federal Housing Finance Agency had a maximum conforming loan limit for 2015 at $520,950. That number has been raised to $554,300 for 2016. The FHA followed suit, raising its loan limit previously set at $520,950 to match the $554,300 figure.

What this means in Sonoma County and elsewhere is that you can buy a home with 3.5 percent down up to the maximum local FHA loan limit. In other words, for people who have been on the fence about buying a home because they didn’t have the cash or because they were at a competitive disadvantage because of rising housing prices, there are now more options.

Using Sonoma County’s previous loan limit of $520,950, for example, a borrower in 2016 will have the ability to borrow up to $33,000 more or spend $33,000 more on a home than they could have with 2015’s FHA underwriting criteria.

Case in point: If you were looking for a home and your loan size was more than $520,950 in 2015, you would have been thrown into the jumbo loan category, requiring significantly more cash out of pocket. This is why the loan limit increases can be a substantial benefit for the right type of borrower, because they would need less cash and have more leniency in loan-to-values needed for a higher priced home.

As a refresher, FHA still offers these flexible financial thresholds:

  • Up to 85 percent cash-out refinancing.
  • Three-year waiting time after a foreclosure.
  • Three-year waiting time after a short sale.
  • Three-year waiting time after a deed in lieu of foreclosure.
  • Two-year waiting time from Chapter 7 bankruptcy.
  • One-year waiting time from Chapter 13 bankruptcy.

While FHA loans can make sense for people who want to get a foot in the door, they do come with some higher costs consumers should consider. FHA loans contain a 1.75 percent upfront mortgage insurance premium, typically financed in the loan amount (or paid for in cash), as well as a monthly mortgage insurance premium.

An FHA loan can help a borrower accomplish financial goals while at the same time bettering their equity position and their credit score to refinance into something lower in the long term. (You can see where your credit currently stands by viewing your free credit report summary, updated each month, on Credit.com.) Like conforming conventional and jumbo loans, FHA loans still require full documentation, such as tax returns for two years, W-2s, pay stubs and bank statements. But they are flexible on using reserves and gift monies to purchase or refinance a home. And be sure to look for tips on negotiating the best price when buying a home.

 

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Small Fed Move Doesn’t Mean You Can’t Buy a Home

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Rising Interest Rates
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By Devon Thorsby

The Federal Reserve announced Wednesday that interest rates would increase by 0.25 percent, or 25 basis points.

The last time the Fed raised rates, “the iPhone didn’t even exist,” says Mark Fleming, chief economist for title insurance company First American Financial Corporation.

Interest rates in the U.S. have been close to zero for the last seven years, intentionally kept low to allow employment and the market to recover from the crash in 2008.

For new homebuyers, the expectation of a rate hike spurred many to buy in the months leading up to the decision and encouraged a cycle of refinancing from existing homeowners.

But the moderate rate increase does not spell doom if you’re looking to buy a home — in fact, it may give you the push you need to get out there and buy your home before interest rates rise again, something economists are predicting for 2016.

How will rising interest rates affect you as a homebuyer? U.S. News asked experts to weigh in on whether you should be concerned about your ability to afford a mortgage and what you should know about interest rates in the next year.

The Fed’s decision doesn’t affect your interest rate as much as you may think. While the interest rate policy changes will affect how interest rates are offered, mortgage rates function separately, and are in fact far more volatile than the Fed’s interest rate.

Jonathan Smoke, chief economist for realtor.com, explains rates for new fixed mortgages not only fluctuate on their own, but have changed in anticipation of increased Fed interest rates, without any actual change in policy.

“When you look at the volatility of what rates have done around the ‘what is the Fed going to do’ all year long, we’ve had enormous movement in mortgage rates,” Smoke says. “We’ve had roughly 70 basis points of movement in the 30-year [fixed-rate mortgage] alone in the last 12 months when the Fed hasn’t done anything.”

Rising interest rates don’t mean you can’t find a mortgage that works for you. The rate hike by the Fed is minor and isn’t likely to squeeze too many consumers out of being able to buy a home. You might have to reconfigure what you put down versus what you pay monthly but as Smoke emphasizes, mortgage rates differ from day to day and lender to lender.

“It’s like buying gasoline — it’s different by provider, it’s different one street to the next,” Smoke says.

Higher interest rates can give the push you need. Many economists are expecting interest rates to continue to increase throughout the next year by a total of 1 percent, and while they are small, steady increases, getting a mortgage on the lower end is always a better idea than waiting and paying more.

Steve Rick, chief economist for CUNA Mutual Group, which builds financial products for credit unions nationwide, says that extra push to get homebuyers and other consumers moving in the market could serve as an additional stimulus for the economy.

“We could see faster economic growth next year because the Fed is raising rates, because it will help with confidence, and it will help with people trying to get ahead of the rising rate environment,” Rick says.

Increased rates can help keep home appreciation in line with wage increases. As housing markets continue to recover from the recession, home values have been appreciating rapidly, outpacing wage increases and making it more difficult for everyone to afford them.

“When you raise rates, you slow down the pace of house price appreciation,” Fleming says, noting mortgage rates will go up regardless of the Fed’s decision. By slowing the increase of home prices, the same people who could afford a house today will likely be able to afford the same house down the line, without being edged out by rapid property appreciation.

But at the moment, Rick notes, “housing is still relatively affordable,” and after such a long period of no interest rate changes, the Fed’s decision to increase rates by 0.25 percent isn’t going to stop people from making big purchases such as cars or homes with financing.

If you already own a home, you likely don’t have to worry about adjustable-rate mortgages. Because chances are you don’t have one. “The majority of mortgages that were taken out in the last couple years were 30-year fixed mortgages,” says Svenja Gudell, chief economist for Zillow. “We’re talking 85 to 90 percent of originations.”

Gudell notes many homebuyers are overinsured with a 30-year fixed rate mortgage — because the chances they’ll stay in one home for 30 years are slim — but many are not willing to take the risk of facing higher rates down the line in the wake of the subprime mortgage crisis.

But if you get an ARM, you don’t need to be scared. ARMs typically have a locked interest rate between five and seven years, so your interest rate is unaffected as long as you’re in that period. But even if you are in the floating rate part of your mortgage, Gudell and Fleming agree that rate hikes down the line will likely remain affordable.

“The increase in the mortgage rates are going to be so tame and so controlled that [homeowners] will be able to adjust over time,” Gudell says.

Fleming adds that a 1 percent total increase by the end of 2016 will likely bring your interest rate to 4 to 5 percent, equating to about $50 to $70 per month in additional payments, which is minimal. “You can find 50 bucks by going to Starbucks less often,” he says.

You should still shop around. Treat your mortgage like any other major purchase — weigh your options and compare rates before you sign on the bottom line. The mortgage, and your ability to pay it off, are just as important as the house you choose to buy.

“Consumers will be able to mitigate some of the increases by putting as much effort into finding their mortgage as they do in finding their dream home,” Smoke says. “You don’t just take the first offer; you don’t just go to the lender that was recommended. Pursue and understand that you can get different rates.”

 

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With Fed Move on Horizon, Mortgage Rates Edge Up to 3.95%

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WASHINGTON (AP) — Average long-term U.S. mortgage rates edged higher this week following three straight weeks of declines, amid expectations that the Federal Reserve will raise its key short-term interest rate next week.

Mortgage buyer Freddie Mac says the average rate on a 30-year fixed-rate mortgage rose to 3.95 percent from 3.93 percent a week earlier. The average rate on 15-year fixed-rate mortgages increased to 3.19 percent from 3.16 percent.

The key 30-year rate was slightly above its level of a year ago, 3.93 percent. The rate has increased significantly overall since the end of October, when it stood at 3.76 percent.

An interest rate hike by the Fed, expected to come at its policymaking meeting next Tuesday and Wednesday, would be the central bank’s first in nearly a decade.

 

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Mortgage Rates Remain Low at 3.73% Ahead of Week’s News

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ZillowThe weekly mortgage rate chart illustrates the average 30-year fixed interest rate in six-hour intervals.

By Lauren Braun

Mortgage rates for 30-year fixed home loans fell this week, with the rate borrowers were quoted on Zillow at 3.72 percent Tuesday, down three basis points from last week.

The 30-year fixed mortgage rate hovered around 3.75 percent throughout the week before dipping slightly.

“Mortgage rates remained flat most of last week, holding near their lowest levels in a month,” said Erin Lantz, vice president of mortgages at Zillow. “We expect rates to be more volatile this week leading up to Friday’s monthly jobs report, several important Fed speeches and possible shifts in energy markets after the Organization of Petroleum Exporting Countries’ (OPEC) annual summit on Friday.”

Additionally, the 15-year fixed mortgage rate was 2.91 percent. For 5/1 ARMs, or adjustable rate mortgages, the rate was 2.92 percent.

Check Zillow for rate trends and up-to-the-minute mortgage rates for your state, or use the mortgage calculator to calculate monthly payments.

 

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