Fixed mortgage rates continued to mostly hold steady this week, amid mixed economic reports and some signs of an improving housing market, Freddie Mac reports in its weekly mortgage market survey.

However, one rate was on the move: the five-year adjustable-rate mortgage took a dip, reaching a new record low at 3.22 percent.

Here’s a closer look at mortgage rates for the week:

• 30-year fixed-rate mortgage: averaged 4.51 percent, which is up slightly from last week’s 4.50 percent average. A year ago at this time, the 30-year rate averaged 4.58 percent.
• 15-year fixed-rate mortgage: averaged 3.69 percent, which is the same as last week’s average. Last year at this time, the 15-year rate averaged 4.04 percent.
• 5-year adjustable-rate mortgage: reached a new low of 3.22 percent, compared to last week’s 3.25 percent average–which was the previous record low. Last year at this time, the 5-year ARM averaged 3.79 percent.
• 1-year ARM: averaged 2.97 percent this week, down from last week’s 2.99 percent. A year ago at this time, the 1-year ARM averaged 3.80 percent.

Will Rates Stay Low?

The 30-year fixed-rate mortgage, the most popular choice among home buyers, has been hovering around 4.5 percent for the last four weeks. However, Nothaft expect the rate to soon edge slightly higher.

“Our expectation for the second half of the year is to see rates fluctuate between 4.5 percent and 5 percent,” says Nothaft. “We’ve been at the low end of that range recently. We think it’s likely to climb to the upper part of the range by the end of the year.”

Source: “Mortgage Rates Mixed; 30-Year Fixed Continues to Hold Steady,” Freddie Mac (June 30, 2011) and “Mortgage Interest Rates Rise Slightly,” Los Angeles Times (July 1, 2011) [No link available.]

Wells Fargo Securities Chief Economist John Silvia warns that higher interest rates are on the horizon, with the Federal Reserve set to end its program of buying U.S. Treasurys in June.

He expects higher interest rates to put added pressure on a struggling residential real estate market, but does not expect them to halt the broader recovery. Silvia forecasts that Treasury rates could rise by one-half to a full percentage point, which in turn will affect mortgage interest.

Source: “Interest Rates to Rise as QE2 Ends, Economist Warns in Denver,” Denver Post, Aldo Svaldi (05/05/11)

Mortgage applications to purchase homes increased 14.4 percent last week on an adjusted basis compared to the previous week, according to the Mortgage Bankers Association weekly survey.

The unadjusted Purchase Index increased 9.6 percent compared with the previous week and was down 7.4 percent compared to the same week a year ago.

On a seasonally adjusted basis, this is the highest Purchase Index recorded since the week ending May 7, 2010 in the middle of the tax-rebate push.

“The increase in purchase applications last week aligns with other incoming data suggesting that consumers are feeling somewhat more confident with their financial situation,” said Michael Fratantoni, the association’s vice president of research and economics.

“The level of purchase applications on a seasonally adjusted basis is now at its highest level since the expiration of the homebuyer tax credit,” Fratantoni concluded.

Interest rates were mixed, with 30-year fixed-rate mortgages rising to 4.50 percent from 4.46 percent and 15-year fixed-rate mortgages decreasing to 3.83 percent from 3.87 percent.

Source: Mortgage Bankers Association (11/24/2010)

Under Fannie Mae’s new lending guidelines, which will take effect Dec. 13, securing a mortgage will become easier for some borrowers and more difficult for others.

These new rules will allow buyers to use gifts and grants from nonprofit groups for their minimum 5 percent down payment. Freddie Mac is also considering similar new guidelines, according to spokesman Brad German. Borrowers previously were required to contribute a minimum 5 percent down payment from their own funds, with additional down payment money permitted from a gift.

These new rules are “definitely going to help upgrade buyers and young couples who for whatever reason don’t have enough money and are getting some from their families,” said Edward Ades, the owner of broker Universal Mortgage. The gift rules apply only to single-family principal residences and cover mortgage amounts in excess of 80 percent of the property’s value. The loan balance also has a limit of $729,000 in high-cost areas like New York City and $417,000 in other areas.

At the same time, Fannie Mae is cracking down on debt-to-income ratios, with the maximum ratio for those seeking a conventional mortgage set to drop from 55 percent to 45 percent under the new guidelines. Fannie Mae is also increasing its scrutiny of payment histories on revolving debt, and buyers who have missed a payment will have 5 percent of the total balance added to their ratios.

Under the new rules, borrowers who have gone through foreclosure will be excluded from obtaining a Fannie-backed loan for seven years, an increase from the previous limit of four years.

Source: The New York Times, Lynnley Browning (11/21/10) © Copyright 2010 Information Inc.

Despite record-low interest rates, an increasing number of Americans can’t afford to buy a house.

The nation’s two largest mortgage lenders, Wells Fargo & Co. and Bank of America Corp., have raised the minimum required credit score on FHA-insured loans to 640 from 620.

Requiring a 640 credit score excludes about 15 percent of FHA borrowers, FHA commissioner David Stevens said.

Such a high limit will further delay a recovery in the real estate market, says Ron Phipps, president of the National Association of REALTORS®.

Source: Bloomberg, Jody Shenn and John Gittelsohn (11/17/2010)

Recent legislation and changes in the marketplace are increasing the use of reverse mortgages. Here are three factors that make reverse mortgages an improved retirement-planning tool.

1. Fees are lower. The government with support from lenders has revised how reverse mortgages are structured.

2. Loans are more flexible. New loans let borrowers take money as they need it instead of all at once.

3. Selling isn’t always feasible. Reverse mortgages generally don’t pay as much as selling a house outright, but these days selling a house can be very difficult.

Source: SmartMoney.com, Alyssa Abkowitz (11/01/2010)

The three major U.S. credit reporting agencies are offering a new FICO score for prescreening, originating, and servicing home loans that better predicts the likelihood of default.

The FICO 8 Mortgage Score from Fair Isaac Corp. uses the same 300-850 scoring range but more effectively flags accounts 90 days or more past due, which corrals more risky borrowers into the lower levels.

The new product also includes additional codes that help lenders understand and explain the ratings to applicants.

Source: Inman News (10/28/10)

Federal Housing Administration Commissioner David Stevens this week urged the Obama administration to pressure mortgage lenders to write down principal for underwater borrowers.

“In my view we need to push hard on the industry. Servicers and investors have got to begin writing down principal,” Stevens told a Women in Housing and Finance meeting in Washington, D.C.

Instead of freezing foreclosures, Stevens said, mortgage servicers should be figuring out how to prevent foreclosures to “keep families who could stay in their home in their home so they don’t get to this final stage where we’re worried about affidavits,” Stevens said.

Source: The Wall Street Journal, Jeff Sparshott (10/19/2010)

Reverse mortgages are very different from any other loan product on the market. Let’s briefly touch on the basics.

What is a Reverse Mortgage?

A reverse mortgage is a loan against the equity of your house. You can turn your equity into cash without having to make monthly payments to repay the loan. You can get the cash out in one lump sum, regular monthly payments, or a type of credit line account that lets you withdraw money when you need it. Typically, you don’t pay anything back until you sell your home, or until you die.

Who Qualifies?

As with any type of loan products, qualification criteria changes regularly and varies by lender, but to qualify for most reverse mortgages you must own your home, have equity, and be 62 years of age or older.

When to Use It

Well, this is a question that’s impossible for me to answer, but I would say that if you qualify, and are in need of cash, a reverse mortgage is one vital option to be informed about. For the most part, a reverse mortgage is used by retirees to help cover their living expenses.

Conclusion

It is important for the borrower to understand the risks involved with a reverse mortgage. As with any type of mortgage, a reverse mortgage is a major financial decision, and it is important the borrower be aware of all material facts involved with this type of transaction. Be sure to thoroughly educate yourself before signing on the dotted line.

Good luck!

As a result of the mortgage meltdown and government stimulus programs that have sprouted, there are many agencies that offer assistance to help you in your home search and reduce your down payment requirements. While these may reduce the funds you need out of pocked, some place a ‘silent second’ on your home, meaning they may be required to be repaid at a later date.  Examples are:

• Neighborhood Stabilization
• Home Path
• Home Free
  
• American Dream
• CAMP
• Home in Five
• HUD Repossessions