By Dan Green (NMLS #227607) for themortgagereports.com
Mortgage rates continue to hang near all-time lows. The 30-year fixed rate mortgage now averages 3.40% nationwide for conforming home loans via Freddie Mac, and the 15-year fixed rate mortgage averages 2.69%. The rates are available for borrowers wanting to pay 0.7 discount points at closing.
This week marks the 8th straight week that 30-year rates are under 3.50%, overall.
About The Freddie Mac Primary Mortgage Market Survey
The mortgage rate data comes from Freddie Mac, a purchaser of U.S. home loans. Freddie Mac is one of two government-backed groups which define “conforming mortgages”. The other is Fannie Mae. A conforming mortgage is a mortgage which meets the underwriting standards of either Freddie Mac or Fannie Mae.
Conforming mortgages are the most common mortgage type nationwide. Other loan types include FHA mortgages, VA mortgages, USDA mortgages and jumbo mortgages.
Each week, between Monday morning and Wednesday at noon, Freddie Mac surveys 125 affiliated banks for their respective “going mortgage rate” which are assigned to prime borrowers making a home purchase with 20 percent downpayment.
Typically, a “prime borrower” is one with excellent credit, verifiable income, and a low debt-to-income (DTI) ratio and the majority of banks reply within the survey’s first 36 hours.
Freddie Mac then compiles this data into the Primary Mortgage Market Survey (PMMS) which lists average mortgage rates for popular loan products plus their respective, required accompanying discount points by region, and nationally.
The PMMS is released Thursday. It reflects rates as they existed earlier in the week.
30-Year Fixed Rate Mortgage : 3.40% Plus Points, Closing Costs
This week, Freddie Mac reports that the average 30-year fixed rate mortgage rate rose 1 basis points to 3.40% nationwide for borrowers willing to pay a one-time fee of 0.7 discount points at closing plus a full set of closing costs.
0.7 discount points is equal to 0.7 percent of the borrowed loan size such that a homeowner in Loudoun County, Virginia; San Jose, California; or Bergen County, New Jersey borrowing at the local jumbo-conforming loan limit of $625,500 would pay $4,378.50 in discount points at closing.
Discount points are considered prepaid mortgage interest by the IRS and may be tax-deductible for some borrowers. However, not all borrowers will want to pay them.
Thankfully, there are low-cost mortgage options.
One low-cost mortgage option is to opt-out of discount points. Most lenders offer this choice. With no discount points, though, expect to be quoted a slightly higher mortgage rate.
As a general rule, 1 discount point has the effect of lowering your mortgage rate by 0.25 percentage points. To waive discount points, therefore, would raise your “Freddie Mac mortgage rate” to near 3.625 percent.
There is also a zero-closing cost option.
In the zero-closing cost option, your mortgage rate is raised even higher and the increase can be used to offset any and all closing costs associated with the home loan.
Not all lenders offer zero-closing costs mortgages but many do. In general, a quarter-percent increase to your rate will offset all closing costs, assuming a loan size of at least $200,00 and assuming that loan costs are relatively low in your home state.
In Florida, for example, state closing costs are high which makes it a challenge to qualify for a zero-closing cost mortgages. In North Carolina, though, where state closing costs are low, qualifying for a zero closing cost mortgage can be easier.
15-Year Fixed Rate Mortgage : 2.69% Plus Points, Closing Costs
The 15-year fixed rate mortgage rate moved opposite of the 30-year fixed rate mortgage rate this week, falling 1 basis point to 2.69% for borrowers willing to pay 0.7 discount points plus closing costs.
The 15-year fixed rate mortgage is terrifically low as compared to historical standards. Versus 4 years ago, 15-year mortgage rates have fallen by more than half.
- October 2008 : 5.89% for the 15-year fixed rate mortgage rate
- October 2012 : 2.69% for the 15-year fixed rate mortgage rate
Putting these figures to a real-life example, a Columbus, Ohio homeowner who borrowed at the local conforming loan limit of $417,000 in 2008 via a 15-year fixed rate mortgage could refinance into today’s 15-year mortgage rates and get savings of 35 percent per month.
This is an astounding figure considering the large number of underwater U.S. homeowners carrying mortgage rates from 2006-2009. Via HARP 2.0, slowly, these homeowners are refinancing to today’s low rates and taking advantage.
HARP mortgages are helping U.S. homeowners save huge money monthly.
Mortgage Rates : See Today’s Mortgage Rates
Mortgage rates remain near all-time lows. They may fall between now and the New Year, or this may be the lowest. We can never know for sure. Therefore, if today’s mortgage rates fit your budget and your needs, consider locking something in.
Mortgage rates have more room to rise than to fall. Get started with a rate quote.
bc@smarterborrowing.com 617.771.5021
