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In holiday-shortened trading, mortgage rates dropped again last week.
Costs on a conventional 30-year mortgage dropped approximately 43 basis points, or $430 per $100,000 borrowed — roughly the equivalent of a one-eighth of one percent improvement to 30-year mortgage rates.
Pricing improved with VA loans and FHA loans, too, falling nearly 31 basis points, or $310 per $100,000 borrowed. This, too, is roughly equal to a 0.125 percentage point mortgage rate improvement.
Mortgage rates are now at a 12-month best nationwide. It’s an excellent time to be shopping for a mortgage.
Freddie Mac Survey : 30-Year Fixed At 4.12%
According to the weekly Freddie Mac Primary Mortgage Market Survey (PMMS), for conventional mortgages, 30-year mortgage rates now average 4.12% nationwide; and 15-year mortgage rates now averages 3.21%.
Both rates are near one-year lows. To lock such low rates, though, borrowers are paying discount points.
Discount points are a one-time closing cost which lower a borrower’s rate below the “current market rate”. 30-year mortgage rates average an accompanying 0.6 discount points as of last week. 15-year mortgage rates average 0.5 discount points.
Discount points are paid as a percentage of your total loan size such that a buyer in Boston, Massachusetts borrowing at the 2014 conforming loan limit of $470,350, and getting the 30-year rate of 4.12%, would be charged a discount point fee of $2,882.
However, discount points remain optional.
Borrowers choosing to pay zero discount points should expect to be quoted a slightly higher mortgage rate. Loans with zero points are currently being quoted near 4.25%.
Loans with 1 point or more are getting quoted near 3.75%.
Traits Which Affect Your Mortgage Rate
It’s not just discount points which can raise or lower your mortgage rate. The specific traits of your loan will make an impact, too.
For example, borrowers with exceptionally high credit scores or low loan-to-value (LTV) often get quoted mortgage rates which are lower than for persons with low credit scores or high loan-to-value.
In general, borrowers with credit scores over 740 get access to the lowest mortgage rates available. Borrowers with credit scores between 580-620 are often quoted rates which are not quite as low.
The type of home you’re financing matter, too.
For loans via Fannie Mae and Freddie Mac, 2-unit, 3-unit, and 4-unit homes are subject to mortgage rate adjustments which can add 0.25 percentage points to your quoted mortgage rate, or more.
Loans for second homes and investment properties, which includes vacation properties, retirement homes, and condotels, can also raise your mortgage rate.
If your particular mortgage is subject to adjustments because it’s a multi-unit; or because your credit scores are low; or because your loan-to-value is too high, consider using an FHA loan, VA loan or USDA loan instead.
None of these program will adjust your mortgage rates higher because of a specific loan trait. Plus, qualifying can be easier, too.
This Week : May Jobs Report Dictates Rates
Since the start of the year, mortgage rates have been on slow, steady decline.
Since peaking January 1, rates have dropped close to one half-percentage point, which has increased home buyer purchasing power by more than 6%. It has also opened hundreds of thousands of refinance opportunities for existing U.S. homeowners.
Mortgage rates are now down through 5 straight weeks. This hasn’t happened in a year.
However, this week, momentum could reverse. The government is releasing the May jobs reports and, whenever the jobs market is involved, mortgage rates tend to get jumpy.
This is because the U.S. labor market is the key input for the Federal Reserve’s active stimulus programs — most notably, its third round of quantitative easing (QE3).
QE3 is the program via which the Fed keeps mortgage rates suppressed. As U.S. jobs go, therefore, so go your mortgage rates.