Time to buy as lending rate hits record low

As reported by Jim Woodard, Open House, News & Record Sunday, June 10, 2012


As we move into June and (unofficially) the summer season, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.91 percent. That’s the lowest rate in history for 80 percent loan-to-value ratio loans, according to a report from the Mortgage Bankers Association.


The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.23 percent. The rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.70 percent, the lowest rate in history.


Seldom has home affordability been as high as it is today. With those low mortgage rates and low prices, homeowner affordability continues to hit record levels, reaching another high for the first quarter of 2012, according to the National Association of Home Builders and Wells Fargo Housing Opportunity Index.


During the previous record-breaking 2011 fourth quarter, 75.9 percent of homes sold were affordable to median-income earners. For this most recent quarter, data showed 77.5 percent of all new and existing homes sold were affordable to families earning the national median income of $65,000.


The key reason for the high level of affordability is that nationwide home prices are off about 36 percent from their peak. Median income has risen by about 10 percent, and mortgage rates are below 4 percent.


Are housing counseling services really effective?


The free services approved by the Department of Housing and Urban Development have proven to be quite effective.


Two recent reports were recently completed on the impact HUD-approved housing counseling has for families who purchase their first homes and those struggling to prevent foreclosure.


In both studies, HUD found counseling significantly improved the likelihood homeowners remained in their homes.


HUD found that 35 percent of participants became homeowners within 18 months of pre-purchase counseling and only one buyer subsequently fell behind in mortgage payments.


The study reveals that, with a counselor’s help, nearly 70 percent obtained a mortgage remedy to retain their home, and 56 percent became current on their mortgages.


“These two studies underscore the need to continue supporting housing counseling programs across this country,” said Raphael Bostic, HUD’s assistant secretary for policy development and research.



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