Find The Lowest Mortgage Rates Refinance Rates & Home Purchase Rates Just One Click! = Current Rate Chart
Selecting the Best Mortgage Rate
Finding the best mortgage rate may not be as easy as simply identifying the lowest interest rate (30 year mortgage rates) available. The criteria a mortgage shopper should apply must begin with the question of how long they plan to hold onto the mortgage and retain ownership of the property. There is no reason to consider the option of paying points and fees to buy down the interest rate when a borrower does not plan to own the property long enough to re-coup (or at least break even) on the closing costs. The second criteria that should be used in determining whether to buy the interest rate down by paying point and fees, is whether a borrower is refinancing (refinance mortgage rates) or purchasing the property in question. When refinancing, points and fees have a different tax treatment than if the transaction involves a purchase. Deducting points and fees typically has a more favorable tax treatment in a purchase transaction rather than in refinancing when the deduction of points is normally amortized over the life of the loan and not deducted in the year they are paid as is typically the case in a purchase.
Another criteria frequently used to determine the best mortgage rate is APR or the Annual Percentage Rate. The purpose of the APR is to give the mortgage consumer a basis of comparing several loans by examining the total cost of the loan, including some specific costs, over a period of time by reflecting some of those costs in the interest rate (30 year mortgage rates). The problem with the APR is that it is not required to be calculated the same way across the board, for instance one area were lenders can differ dramatically when it comes to quoting APR, is the number of days of pro-rated interest they use when arriving at their APR calculation. Pro-rated interest is the number of days remaining within a month that you will pay interest after your new loan closes, for example if your loan should close on the 15th of the month then you would have 15 days (or 16 if the month has 31 days) interest remaining to pay on the new loan. The problem with lenders including the pro-rated interest in the APR is that there is no uniform requirement for how it is quoted. Some lenders use 15 days in their calculation and some may use 30 days, a few may even use zero days of pro-rated interest in their APR calculation so it will appear (somewhat deceptively) to be the lowest among their competitors.
What type of loan would be best mortgage for you? With so many sub-prime borrowers having been burned recently by adjustable rate mortgages, ARMs are being avoided like the plague in this new post-mortgage meltdown era. It’s unfortunate that all adjustable loans are being written off by many consumers and are now being presented in the same negative light. In fact, given the right circumstances, an adjustable loan can be a wonderful tool for managing one’s personal cash flow if a borrower is both responsible and educated in maintaining their own finances. Risk tolerance, along with personal confidence and skill, in controlling one’s finances is critical in determining whether an ARM might be right for a particular borrower. ARMs can also be useful for borrowers who have a short term ownership horizon, perhaps of less than 3-5 years. Of course given the soft real estate market currently experienced throughout the country, buying a home with such a short term time horizon would likely be a foolish strategy. Fixed rate mortgages (30 year mortgage rates) are always a safe bet and in many cases borrowers are better off taking a 30 year term versus the shorter 15 year term. Borrowers opting for the 30 year can always make additional payments to shorten the term of the loan (assuming they take a recommended no prepayment penalty loan), this way they remain in control of managing their mortgage payment and cash flow. A 15 year mortgage can be a terrific, less costly option for the more mature borrower who does not have as many competing demands for their cash (i.e. saving for retirement, kid’s college education, etc.).
As you have now seen, determining what the best mortgage rate for you may be is not as simple as it sounds. There are many considerations to take into account and the key to making accurate loan comparisons is to be certain you are truly comparing loans on an apples-to-apples basis and not looking at two loans that have completely different rate and yield equivalencies.
Growth in purchase loan originations, closings signal growing strength in
housing
(4/23/2012) Erate Exclusive - In another sign more buyers are on the
move, the share of purchase loans is growing.
In March, the percentage of purchase loans rose to 39 percent, up from 33
percent in February.
There was a corresponding increase in first-time-buyer-favorite Federal
Housing Administration (FHA) loans, which rose from 25 percent in February
to 28 percent in March, according to Ellie Mae's March Origination Insight
Report.
What's more, a higher percentage of purchase
mortgages closed (56.4 percent) compared to refinances (42.1 percent),
based on mortgages that ran through Ellie Mae's mortgage management
software, approximately two million loan applications, or 20 percent of all
U.S. mortgage originations.
Unfortunately, credit remains tight. Only 47 percent of all applications
closed.
"In March, as we moved into the spring selling season, underwriting standards for both
purchase and refinance loans continued to be highly conservative," said
Jonathan Corr, chief operating officer of Ellie Mae.
Ellie Mae is a Pleasanton, CA company offering digital operating system for mortgage originators,
including customer relationship management, loan origination, and business
management software.
"The average loan denial in March still had a FICO credit
score just shy of 700, and more than 15 percent in equity or a down
payment. On average, there was an 8-point spread between back-end DTI (debt-to-income) ratios for approved-versus-denied
loans last month. The average denials for conventional refinances and
purchases continued to have significantly higher FICOs, lower LTVs
(loan-to-value) and more restrictive DTIs than the overall averages," Corr
said.
Ellie Mae reported in March, the average loan closed had a FICO score of
749, a LTV ratio of 77 percent and a DTI ratio of 23/35. Denied loans, on
average had a FICO of 699, an 85 percent LTV, and a DTI of 27/43.
Application-to-closing times are a bit faster.
"The timeline from application to closing for the average loan was 42
days in March, two days shorter than February, which suggests that the
industry was working through the surge in refinance applications that came
in at the end of last year," Corr added.
With rates at historically low levels, the percentage of borrowers opting
for adjustable rate mortgages (ARMs) in March was at the lowest point in the
past six months and half the level of last summer.
The majority of loans were 30-year fixed-rate loans (FRM) but 20.2
percent were 15 year notes and 4.2 percent were adjustable rate
mortgages (ARMs). The incidence of ARMs has decreased since September
when they had a 6.0 percent market share. The average note rate for a
30-year FRM has declined steadily from 4.412 in September to 4.080 in March,
Ellie Mae reported.
