The 30-year, fixed-rate mortgage slid for the fifth week in a row, but just barely. It remains at its lowest level since shortly after the presidential election in November. Meanwhile, rates on other types of mortgages were virtually unchanged.
Today’s 30-year fixed is more than 2 percentage points lower than the average over the last 25 years, making this a fine time to get a mortgage.
For even more welcome news, check out what Fannie Mae plans to do, starting in late July. Fannie, which helps provide the liquidity that keeps the mortgage industry running, will relax banks’ lending standards. More people will qualify for mortgages.
Here’s the gist of the change: Qualified borrowers will be able to devote up to half of their pretax income to their monthly debt payments, including their house payments. Previously, Fannie limited total debt payments to 45 percent of borrowers’ income in most cases.
Bankers call this percentage the back-end ratio. To calculate it, you add up all the monthly payments on your installment debts (house, student and auto loans, credit cards, plus alimony and child support). You divide that number by gross income (that is, before taxes).
When you apply for a mortgage, lenders prefer that you keep the back-end ratio to 36 percent or less. But in some cases, they’ll let you go higher. Fannie’s limit has been 45 percent for most borrowers, and it will rise to 50 percent.
The company says it analyzed recent loan applications and decided that the risk of approving the higher-debt mortgages was “appropriate.” It says the change “is expected to increase the percentage of Approve/Eligible recommendations lenders receive.”
Buyers who take advantage of the new, looser standard will want to feel confident that they’ll be able to make their payments. Bankrate’s mortgage calculator can help you run the numbers.
The change is scheduled to go into effect July 29, when Fannie Mae rolls out its next version of its software for lenders. For now, Fannie’s frenemy, Freddie Mac, is sticking to a maximum debt-to-income ratio of 45 percent.
The benchmark 30-year fixed-rate mortgage fell this week to 4.02 percent from 4.04 percent, according to Bankrate’s weekly survey of large lenders. A year ago, it was 3.69 percent. Four weeks ago, the rate was 4.15 percent.
The mortgages in this week’s survey had an average total of 0.24 discount and origination points.
Over the past 52 weeks, the 30-year fixed has averaged 3.97 percent. This week’s rate is 0.05 percentage points higher than the 52-week average.
Results of Bankrate.com’s weekly national survey of large lenders conducted June 14, 2017 and the effect on monthly payments for a $165,000 loan:
|30-year fixed||15-year fixed||5-year ARM|
|This week’s rate:||4.02%||3.25%||3.41%|
|Change from last week:||-0.02||+0.01||+0.01|
|Change from last week:||-$1.90||+$0.80||+$0.92|