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Mortgage Rates by Loan Product
Mortgage Rate ReportWednesday, April 25, 2018
Mortgage rates moved mostly higher on the week although there were also some positive signs as the market continued to respond to the Fed's increasingly hawkish stance on rates. In its March meeting, the Fed pointed to strong job growth, record low unemployment, an improving economic outlook and an expected boost in near-term inflation to justify its decision to raise the Federal Funds rate 0.250% to 1.500% to 1.750%.
The minutes from the March meeting also shed more light on the Fed's more aggressive outlook on rates. Fed members were unanimous in their forecast for higher inflation, accelerating GDP growth and additional interest rate increases in the future. The Fed meeting minutes highlighted the 2017 tax cuts and recently passed budget as potential economic catalysts, which is code for sources of inflation, while also recognizing the the negative effects of a possible trade war. In sum, the meeting minutes reinforced the Federal Reserve's aggressive forecast for interest rates with the market anticipating two more rate hikes in 2018 and four rate increases in 2019.
Mortgage rates were mixed in response to the meeting minutes as relatively little new information was released. Most lenders had already factored the Fed's March rate hike into their mortgage rate pricing and the expected number of future rate hikes remained unchanged despite the Fed's bullish tone. Over the past week, however, mortgage rates increased moderately as fears of a trade war receded and more positive economic news hit the market, although the news was not all negative for borrowers.
The interest rate for a 30 year fixed rate mortgage increased 0.125% to 4.375% while the interest rate for a 15 year mortgage climbed 0.125% to 3.875%. The interest rate on a 5/1 adjustable rate mortgage (ARM) also moved 0.250% higher to 3.875% as short term mortgage products became more expensive. In more positive news, FHA mortgage rates and VA mortgage rates were flat at 3.875%, with both programs appealing to borrowers focused on low or no down payment options, especially first-time home buyers. Jumbo mortgage rates were also steady at 4.375% while non-owner occupied mortgage rates remained at 4.625%.
The Federal Reserve's decision to increase interest rates in March was widely anticipated and its meeting minutes only made its long-term outlook more clear. Although there was a bit of a a delay, we are now seeing mortgage rates gradually move higher in response to the Fed. With the Fed reinforcing its forecast for multiple rate hikes in 2018 and 2019 (up to six!), prospective borrowers looking to buy a home or refinance their mortgage may be able to lock in a lower mortgage rate by acting now. While interest rates are challenging to forecast, the Fed's latest statement and meeting minutes underscore how higher inflation could yield more aggressive action on interest rates.
Because mortgage rates fluctuate daily, we continue to actively monitor the mortgage market for updates. Borrowers should check the FREEandCLEAR mortgage rate tables regularly to review customized, updated mortgage rates for lenders in their area. Our rate tables are free to use and require no personal information.
Why Select an FHA Mortgage
Low Down Payment.
The main benefit of the FHA mortgage program is that it enables borrowers to buy a home with a down payment as low as 3.5% of the property purchase price. This compares to 10% - 20% down payment required to buy a home with most conventional mortgage programs. Borrowers can also combine the FHA program with a down payment assistance program or closing cost grant to further reduce the personal financial contribution they are required to make to buy a home. The FHA program charges borrowers additional up-front and ongoing fees but makes home ownership more attainable, especially for low-to-moderate income borrowers. The low down payment requirement also makes the FHA program an attractive financing option for first-time buyers.
Low Interest Rate.
The interest rate for an FHA mortgage is typically .125% - .500% lower than the current interest rate on a conventional loan or other low / no down payment mortgage programs. This is because borrowers are required to pay an ongoing FHA Mortgage Insurance Premium (MIP) which is similar to private mortgage insurance and protects the lender against default or foreclosure. The FHA MIP is an extra ongoing cost for borrowers but the insurance enables lenders to offer lower rates on FHA loans. Borrowers should consider both the interest rate and FHA MIP when evaluating the total cost of the loan.
Flexible Borrower Qualification Requirements.
The borrower qualification requirements for the FHA mortgage program are more flexible than for other low or no down payment mortgage programs. For example, the program typically requires that borrowers have a minimum credit score of only 580 and there are cases where a borrower can obtain an FHA mortgage with a lower score. Additionally, lenders have more discretion when applying debt-to-income ratios to determine what size mortgage borrowers can afford. The higher the debt-to-income ratio, the larger the mortgage the borrower can afford.
Available to All Borrowers.
The FHA mortgage program is available to all borrowers that qualify. There are no borrower income limits although there are limits on loan amounts available through the program. Additionally, the program applies to all eligible properties, up to four units in size, as long as the borrower occupies the property.
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More FREEandCLEAR Mortgage Resources
Use our FHA Mortgage Qualification Calculator to determine what size FHA loan you can afford as well as the required up-front and ongoing FHA Mortgage Insurance Premium
Review our comprehensive overview of the FHA Mortgage Program including borrower eligibility requirements
We provide a thorough summary of multiple mortgage programs that enable borrowers to buy a home with little or no down payment
Ask the FREEandCLEAR Mortgage Expert about the FHA mortgage program or any mortgage topic and receive an insightful response within 24 hours