The home buying season has begun as pending home sales, representing signed contracts, rose during the month of March to the highest seen in three years. According to the National Association of Realtors, the seasonally adjusted index for pending home sales increased 1.5% to 105.7 and is at the highest level since April 2010 and 7% higher than the same time a year ago.
Completed sales remain low according to the Commerce Department who reported a decline of 0.6% in existing home sales for March. While 10.3% higher than a year ago, sales of single family homes fell 0.2% while condo and co-op sales fell 3.2%. The Commerce Department also reported that new home sales rose 1.5% in March to 417,000 units on a seasonally adjusted annual basis. This amount is 18.5% higher than March 2012.
The Mortgage Bankers Association Weekly Market Composite Index showed that applications increased 0.2% on a seasonally adjusted basis for the week ending April 19th. The Refinance Index rose 0.3% and represented 75% of total application volume. The seasonally adjusted Purchase Index also rose 0.3% and was at the highest level since May 2010. HARP applications continue to be strong and represented 32% of total refinance applications.
According to the most recent survey of wholesale and direct lenders performed by FreeRateUpdate.com, current 30 year fixed mortgage rates are as low as 3.125%, 15 year fixed mortgage interest rates are as low as 2.375% and 5/1 adjustable mortgage rates are as low as 2.375%.
Lenders require that borrowers have good credit in order to receive low interest rates available at the time of application for home purchase loans and traditional mortgage refinances. HARP refinances will be available until the end of 2015 for underwater homeowners who have loans that were sold to Fannie Mae and Freddie Mac prior to June 1, 2009. While the HARP program does not require an appraisal or any other documentation in most cases, it does require a good mortgage payment history. The extension of HARP will allow more homeowners to meet this eligibility criteria.
Current FHA 30 year fixed mortgage interest rates are as low as 3.325%, FHA 15 year fixed rates are as low as 2.625% and FHA 5/1 adjustable mortgage rates are as low as 2.750%. Even though FHA guidelines for FHA loans have changed, they are still much more consumer friendly than other loans at this time. Coming June 3, 2013, the FHA annual mortgage insurance premium will no longer be allowed to be canceled. Borrowers still have time to beat this deadline by obtaining an FHA case number prior to that date.
The FHA upfront mortgage insurance premium has not changed at this time, however, this and other FHA fees still make FHA closing costs (APR) high. Many borrowers use seller concessions up to 6% to pay for these expenses. Existing FHA borrowers can reduce their mortgage costs by refinancing through the FHA streamline refinance that, with no cash out, does not require an appraisal or other documentation. Until the end of 2013, the FHA streamline is offering reduced upfront and annual mortgage insurance premiums for loans that were endorsed prior to June 1, 2009. While the streamline has very little guidelines, it does require a favorable history of on-time mortgage payments.
Current jumbo 30 year fixed interest rates are as low as 3.250%, jumbo 15 year fixed mortgage rates are now as low as 2.250% and jumbo 5/1 adjustable mortgage rates are as low as 2.375%. Having excellent credit is necessary in order to receive low rates offered by lenders. Jumbo loans require full documentation and evidence of substantial assets to cover the larger down payment and additional months of reserves that are usually required by guidelines. Since this market has more competition, lenders can be flexible when considering a quality loan for approval. Borrowers searching for a jumbo mortgage will need to shop around to find the best deal.
Mortgage backed securities (MBS) react to different market conditions and have an affect on mortgage rates which move in the opposite direction. March Core PCE inflation remained flat from February and was below the consensus for an increase of 0.1%. Core PCE is significant because it is the preferred inflation indicator of the Federal Reserve. Personal Income rose 0.2%, which was close to expectations. The Commerce Department reported that Consumer Spending rose 0.2% in March which was down from February’s 0.7% increase.
by Ed Ferrara