mortgage

Mortgage rates tumble

The 30-year, fixed-rate mortgage fell by about one-eighth of a percentage point this week. In normal times, such a modest decrease isn't notable. But this was the biggest one-week decrease in two months, which underscores how steady rates have been lately.

The benchmark 30-year fixed-rate mortgage fell 15 basis points, to 5.52 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.36 discount and origination points. One year ago, the mortgage index was 6.66 percent, and oddly enough, four weeks ago it was 5.55 percent.

The benchmark 15-year fixed-rate mortgage fell 9 basis points, to 4.84 percent. The benchmark 5/1 adjustable-rate mortgage fell 7 basis points, to 4.86 percent.

Weekly national mortgage survey
Results of Bankrate.com's Aug. 19, 2009, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
30-year fixed15-year fixed5-year ARM
This week's rate:5.52%4.84%4.86%
Change from last week:-0.15-0.09-0.07
Monthly payment:$938.92$1,291.10$871.69
Change from last week:-$15.61-$7.70-$7.02

Analysts traced this week's decreases in mortgage rates to investors' desire to sell stocks for the perceived relative safety of bonds. But investor sentiment can snap back in a hurry, meaning that this week's rate decline could go stale quickly.

The Mortgage Bankers Association says refinance applications went up 6.9 percent last week because of lower rates, and added that swings in mortgage rates have caused refinance applications to seesaw. "By contrast," the MBA says, "the purchase activity has not been deterred by interest rate volatility, and has continued to trend gradually upward."

First-timers' credit spurring activity

With the first-time homebuyer's tax credit, the federal government has been trying to encourage what the MBA calls "purchase activity." Qualified buyers can claim a federal income tax credit of up to $8,000. Lenders and real estate agents are using the tax credit as a marketing opportunity.

Jim Sahnger, mortgage consultant for Palm Beach Financial Network in Stuart, Fla., is pushing his peers in other markets to adopt what Sahnger calls the "Million Dollar Challenge."

"It's loan officers that are basically partnering with agents," he says. "Together the whole idea is about putting $1 million of tax rebates back in the hands of area homebuyers." In Sahnger's market, where houses are expensive, virtually every qualified buyer will get the full $8,000 tax credit; 125 sales to first-time buyers will add up to $1 million in total tax credits.

To claim the tax credit, homebuyers have to close on their homes on or before Nov. 30. That creates a scheduling problem that might not be apparent at first glance. The deadline day, Nov. 30, is the Monday after Thanksgiving, and there's a finite number of closings that can be done that day. There will be few, if any, closings done during the four days preceding Nov. 30: Thanksgiving through Sunday. And a lot of businesses will likely close early the day before Thanksgiving. The crowded calendar means that a lot of buyers will need to schedule their closings by Tuesday, Nov. 24, if they want to have a realistic shot of meeting the deadline.

Realistically, it's a good idea to expect around six weeks to elapse between the signing of the purchase contract and the closing. "People really need to make sure they have their negotiations wrapped up by the 13th or the 16th of October so they'll have time to get everything done," Sahnger says. He suggests that buyers get loan approvals in advance.

In other mortgage news, there's a bit of renewed hope in California. Dick Lepre, senior loan consultant for Residential Pacific Mortgage in San Francisco, says SunTrust is marketing a 30-year, fixed-rate jumbo loan through brokers. Lepre's company was offering it at roughly 6.375 percent Wednesday -- about 1 percentage point higher than for a conforming loan.

"This is the first attractive 30-year fixed jumbo I've seen in a while," Lepre says. "Until now the only thing we've seen in this territory, loan-size wise, was 5/1 and 7/1 ARMs. So if somebody really wants a 30-year fixed, this might be attractive."

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