Sept. 16, 2011 – Fixed mortgage rates fell to the lowest level in six decades for the second straight week. But few Americans can take advantage of the historically low rates.

Freddie Mac said Thursday that the average rate on the 30-year fixed mortgage fell to 4.09 percent this week, down from 4.12 percent. That’s the lowest rate seen since 1951.

The average rate on the 15-year mortgage, a popular refinancing option, fell to 3.30 percent from 3.33 percent. Economists say it is likely the lowest rate on the 15-year ever.

Mortgage rates tend to track the yield on the 10-year Treasury note. Worries over Europe’s debt crisis are pushing investors to shift money into safe Treasurys, forcing the yield lower.

Over the past year, the average rate on the 30-year fixed mortgage has been below 5 percent for all but two weeks. That compares with five years ago, when the average 30-year fixed rate was near 6.5 percent. A decade ago, it exceeded 8 percent.

Still, cheap mortgage rates haven’t helped home sales. Sales of new homes are on pace for the worst year on records dating back a half-century. The pace of re-sales is shaping up to be the worst in 14 years.

Many Americans are in no position to buy or refinance. High unemployment, scant wage gains and large debt loads have kept them away.

Others can’t qualify. Banks are insisting on higher credit scores and 20 percent down payments for first-time buyers. Some homeowners have too little equity invested in their homes to meet loan requirements.

Most people must also pay extra fees to get the low mortgage rates. Those fees are known as points, with one point equaling 1 percent of the total loan amount.

The average fees for the 30-year held steady at 0.7 point. Fees paid on 15-year fixed loans and both 5-year and one-year adjustable rate loans were all at 0.6 point.

Once fees are factored in, the average rate on the 30-year loan rises from 4.09 percent to 4.25 percent, Freddie Mac said.

A drop in mortgage rates could provide some help to the economy if more people could refinance. The Obama administration is looking at expanding a government program to help more eligible homeowners refinance. When people refinance at lower rates, they pay less interest on their loans and have more money to spend.

But many homeowners with good jobs and stable finances have already refinanced in the past year. The average rate on the 30-year fixed loan fell to 4.17 percent last November, and to 4.15 percent last month. Both were previous lows.

Homeowners typically pay a few thousand dollars in closing costs when they refinance. To refinance again, most experts say rates would need to fall an additional 1 percentage point to make it worthwhile.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week.

The average rate on a five-year adjustable-rate mortgage rose to 2.99 percent. That’s higher than last week’s 2.96 percent, the lowest records dating to January 2005 and the sixth straight week of record lows for this type of loan.

The average rate for the one-year adjustable-rate mortgage fell to 2.81 percent from 2.84 percent. That’s the lowest on records going back to 1984.
Copyright © 2011 The Associated Press, Derek Kravitz, AP economics writer. All rights reserved.

Sept. 6, 2011 – With mortgage interest rates hovering around 50-year lows, refinancing is an appealing prospect for many homeowners. I think this is especially true considering the stock market’s August gyrations. Taking nervous energy and using it to focus on sure-thing money moves such as lowering payments or paying debt faster makes sense.

According to Freddie Mac’s weekly rate survey, a 30-year, fixed-rate mortgage averaged 4.22 percent. Slice the term in half, and the rate is 3.39 percent for a 15-year, fixed-rate mortgage.

Problem is, refinancing isn’t always possible for homeowners.

The key culprit? Home equity. Homeowners across the country are saddled with low equity – or negative equity – in their homes. While refinancing is possible with as little as 3 percent or 5 percent home equity, it may be less worthwhile after taking mortgage insurance and closing costs into account, said Alex Stenback, a mortgage banker with Residential Mortgage Group in Minnetonka, Minn.

If you don’t have home equity, you still may qualify using a government refinancing program called HARP. Greg McBride, senior financial analyst at Bankrate.com, says HARP is “the Rodney Dangerfield of government housing programs … all the attention goes to the loan modification program, which hasn’t solved any problems.” But HARP (for Home Affordable Refinance Program) can be tough to qualify for, especially for borrowers with second mortgages and mortgage insurance. Plus many homeowners who qualify have already taken advantage of this program.

Lenders also want to see consistent, steady income. “If they’ve had challenges with employment in the past two years, gaps in their employment, that would be the second-biggest challenge,” said Kara Egan, vice president of Edina Realty Mortgage in Edina, Minn. “You’d typically need to be back on the job for six months,” she said. Recent retirees or families relying on self-employment or contract income could also find it difficult to qualify.

Another hurdle for many burned by the recession is having a high enough credit score. The magic number to receive the very best rates is at least 740. You can still qualify for a loan with a score south of 740, but forget about getting a brag-worthy interest rate. But with today’s low rates, “most people have good enough credit to get the lowest rate they’ve ever seen,” McBride said.

Here’s a little-known tip for the credit-challenged but cash-flush. Surprisingly, for 15-year, fixed-rate mortgages, lenders don’t adjust the rate up or down based on credit score. “If you’re willing to step up and make the higher payment, they’re willing to overlook credit blemishes, to a degree,” said Dan Hughes, loan officer at Summit Mortgage in Plymouth, Minn. Generally, you still need a credit score in the mid-600s to qualify for a loan, but if you do, your rate will be as good as your neighbor scoring north of 800.

Refinancing through FHA is also an option for those with scores in the 600s, but a recently increased upfront mortgage insurance payment makes it less attractive.

So you are the poster child of financial health. Does it always make sense to refinance? For Wanda Kath, who has had the same mortgage at 6.65 percent that her family used to buy its “forever” home in Buffalo, Minn., 18 years ago, looking into a refinance is a no-brainer. Even if the she took the no-closing cost route, accepting a slightly higher interest rate for paying nothing at closing, she’d end up with a rate far lower than what she currently has. If she wanted, she could shorten the term of her loan to a 10-year mortgage. Or she could take the monthly payment savings and plow the money into her loan in order to pay off the loan on the existing 30-year timetable.

For rate-chasers who may have refinanced several times, the answer isn’t quite as simple. Hughes tells clients that refinancing makes sense if they can pay no closing costs and still reduce their rate. But it’s a hassle, and before you start the process, consider that the difference in monthly payment may only buy you a couple of pizzas. For example, the monthly principal and interest payment for a $170,000, 30-year, fixed-rate mortgage at 4 percent is $811. Jack up the rate to 4.25 percent and you’d save only $25 a month. Is it worth the hassle of the appraisal and paperwork to save that little?

Probably not.

Five ways to get a lower rate:

1. Research your home’s value. Looking at your home’s tax value, checking online estimates at Zillow.com, or asking a real estate agent for a price opinion can help you determine how much your home might be worth. But those methods will be off 5 to 10 percent almost every time, experts say. “Off 5 to 10 percent is the difference between refinancing the house and not refinancing the house,” said mortgage banker Alex Stenback. The only way to know for sure if a refinance is in the cards is to order up a $400 appraisal.

2. Check your FICO credit score. It’s the most widely used score in the mortgage industry. If you are concerned about your credit, buy your FICO score from one of two credit bureaus for $19.95 ($39.95 for both) at myfico.com. You can also estimate your score at the site, or at www.creditkarma.com. (Link please.)

3. Call your current mortgage holder to see if they can offer a better deal without an appraisal and major paperwork. Compare any offer with at least one bank and credit union before ordering an appraisal. It may also pay to work with a mortgage banker who has access to multiple lenders.

4. Consider the term. Many families are switching from 30-year mortgages to shorter terms. Some are even throwing cash into the mortgage at the closing table. Considering a recent Bankrate.com survey that showed only 24 percent of Americans have at least six months of emergency savings, paying the mortgage faster may not be the best choice for many. My family refinanced to a 15-year mortgage in 2010. It’s working out so far, and I’m happy we’ll have the house paid off before our younger kids are college-bound. But I really like Stenback’s idea of starting a housing fund in a savings account that could be used for a downpayment when it’s time to move, a remodel or just a cash cushion.

5. Create a plan for the money freed up by a lower monthly payment. Will you take the savings and throw that money back into the mortgage to reduce principal faster? Will you start saving for college or retirement or finally pay off that credit card debt? Come up with a plan. Otherwise, you risk whittling that money away with nothing to show for it.

Copyright © 2011 Star Tribune, Minneapolis, Kara McGuire

 Fixed mortgages were mostly flat this week after hitting their lowest levels in decades. But few Americans are capitalizing on them.

The average rate on the 30-year fixed mortgage stayed at 4.22 percent for the second straight week, Freddie Mac said Thursday. The rate hit 4.15 percent two weeks ago, the lowest level on records dating to 1971.

The average rate on the 15-year fixed mortgage, a popular refinancing option, fell to 3.39 percent from 3.44 percent. Two weeks ago, it reached 3.36 – the lowest rate on records dating to 1991 and likely the lowest ever, according to economists.

Mortgage rates typically track the yield on the 10-year Treasury note. Yields rose this week as investors shifted money back to a more stable stock market.

Low rates have done little to revive a weak housing market.

Mortgage applications to purchase a home fell to 15-year lows last month, the Mortgage Bankers Association said. High unemployment, falling home prices and a weaker economy have left many people hesitant to buy a home.

Others can’t qualify for the low rates. Their credit is too weak to meet banks’ tighter lending standards. Many banks are requiring larger down payments. Some potential homebuyers are stuck in homes that are worth less than the existing mortgage.

Over the past year, the average rate on the 30-year fixed mortgage has been below 5 percent for all but two weeks. Yet sales remain unhealthy.

Sales of new homes are on pace to finish the year as the lowest on records dating back to 1963. The pace of re-sales is shaping up to be the worst in 14 years.

Home prices haven’t fared much better. Since the peak of the housing boom in 2007, homes have lost nearly a third of their value. And they are expected to fall another 5 to 10 percent by year’s end, analysts say.

The weak housing market has been a drag on the economy. Without more jobs, the housing market is unlikely to recover any time soon.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week.

The average rate on a five-year adjustable-rate mortgage fell to 2.96 percent. That’s the lowest rate on records dating to January 2005. It was the fifth straight week of record lows for this type of loan.

The average rate for the one-year adjustable-rate mortgage fell to 2.89 percent. Its average of 2.86 percent two weeks ago was the lowest on records going back to 1984.

The rates do not include extra fees known as points. One point is equal to 1 percent of the total loan amount.

The average fees for the 30-year held steady at 0.7 point. The 15-year fixed loans and 5-year and one-year adjustable rate loans were all at 0.6 point.
Copyright © 2011 The Associated Press, Derek Kravitz , AP business writer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.