Mortgage and the Economy
October's economic reports were released this past week and revealed some surprising good news for the economy. From jobs to property values, the results were in the positive zone leading up to the elections. Particularly important was the end of month jobs report. According to the Labor Department, the U.S. economy added 171,000 new jobs in October which was better than the forecast of 125,000.
At the same time, there was an increase of 84,000 more jobs created in August and September than previously reported. However, as more people are re-entering the labor force and looking for work, the unemployment rate did increase to 7.9%. Jobless claims for the week ending October 27th fell by 9,000 to 363,000. Third quarter worker productivity was also up at at 1.9% annual rate, according to the Labor Department.
Consumer Confidence in October increased to the highest level in more than four years, according to the Conference Board. The S&P/Case-Shiller index showed that August property values in 20 cities rose 2% from August of 2011 and was the largest increase in two years, as well as, the biggest year to year gain since July of 2010. Construction Spending also rose 0.6% in September to the highest level in almost three years, according to the Commerce Department. Between jobs and housing, the economy's growth appears to be keeping on track while current mortgage rates remain low.
According to FreeRateUpdate.com's survey of wholesale and direct lenders, mortgage rates remained unchanged and shows that 30 year fixed mortgage rates are as low as 3.000%, 15 year fixed mortgage rates are as low as 2.250% and 5/1 adjustable rates are as low as 1.875%. Good credit and qualifications are required in order to obtain these lowest mortgage rates available. Home purchase loans and traditional mortgage refinances still require full documentation, an appraisal and verifications done by the lender. HARP 2.0 is still available and does not require the same loan protocol.
HARP 2.0 is for borrowers who have conforming mortgages that were sold to Fannie Mae and Freddie Mac prior to June 1, 2009. In most cases, HARP does not require an appraisal and other documentation to receive an approval, but this depends on the lender, lender overlays and details of the mortgage application. HARP loan applications have been up in volume for most of this year, especially after loan to value caps were removed with HARP 2.0. This has and continues to help more borrowers become eligible for approval for refinancing to lower mortgage rates. Finding HARP 2.0 lenders is easy when using the online form which will return a response almost instantly.
FHA's Single Family Outlook for August, 2012 was released this past week. The report showed that for the month of August, 90,880 single family refinance applications were submitted which is more than three times the number of applications for the year 2011. The report also showed that 71,428 purchase loans were FHA endorsed in August with 55,617 for first time home buyers. FHA loans continue to be popular with first time home buyers because of the low down payment, easier credit qualifying guidelines and low FHA mortgage rates.
Current FHA 30 year fixed mortgage rates are as low as 2.750%, FHA 15 year fixed mortgage rates are as low as 2.250% and FHA 5/1 adjustable mortgage rates are as low as 2.250%. Even though FHA closing costs (APR) are high, which is due to the upfront mortgage insurance premium and other FHA fees, borrowers still use FHA mortgages because their down payment requirements, credit guidelines and overall benefits are consumer friendly.
The FHA streamline refinance is a popular FHA mortgage product that does not require an appraisal provided the borrower does not take cash out. For the month of August, 42,607 FHA refinance transactions from prior FHA mortgages were endorsed and 7,894 from conventional conversions. FHA streamline refinances from prior FHA cases totaled 92.8%. The FHA streamline has drastically reduced upfront and annual mortgage insurance premiums for borrowers who have loans that were endorsed prior to June 1, 2009. This program has continued to be very popular during the second half of this year as it gives FHA mortgage holders the opportunity to refinance to the lowest FHA mortgage rates in history.
Areas, such as California, are seeing more activity with home purchases recently. Many of these locations require jumbo mortgages because the necessary financing for a purchase loan is above the conforming and FHA loan limits. Jumbo mortgage rates have remained competitive with jumbo 30 year fixed mortgage rates as low as 3.250%, jumbo 15 year fixed mortgage rates as low as 2.750% and jumbo 5/1 adjustable mortgage rates as low as 2.125%. Borrowers must have excellent credit in order to receive the lowest jumbo mortgage rates available. Having strict guidelines, full documentation that will be verified is necessary. With increased competition in this market, borrowers should shop around in order to get the best jumbo mortgage rates and terms.
MBS prices affect mortgage rates which move in the opposite direction. Usually it is the release of economic data that will create movement in MBS prices, although this has not been the case recently. Even with positive data, MBS prices haven't moved enough to cause any significant swing in average mortgage rates. The Institute for Supply Management reported that Chicago PMI Manufacturing rose to 49.9 which was below expectations of 51.0. Anything below 50 indicates contraction. Factory Orders increased 4.8% in September as compared to August, according to the Commerce Department.
This was the largest rise in orders for manufactured goods in 18 months, since March of 2011. The Institute for Supply Management's non-manufacturing index fell to 54.2 in October from 55.1 in September, which was below expectations. Any measure above 50 is a signal of expansion in industries that make up approximately 90% of the economy. The Euro Zone reported that general unemployment rose to 11.%. For the first time in three months, China's manufacturing expanded as output and orders increased.
FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders' rate sheets to determine the most accurate mortgage rates available to well qualified consumers at about a 1 point origination fee.
Written by Ed Ferrara for www.RealtyTimes.com Copyright © 2012 Realty Times All Rights Reserved.