mortgage

Mortgage rates up for first time in 2010

For the first time this year, mortgage rates went up in Bankrate's weekly survey.

The benchmark 30-year fixed-rate mortgage rose 2 basis points this week, to 5.15 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 0.49 discount and origination points. One year ago, the mortgage index was 5.7 percent; four weeks ago, it was 5.26 percent.

The benchmark 15-year fixed-rate mortgage rose 1 basis points, to 4.55 percent. The benchmark 5/1 adjustable-rate mortgage rose 2 basis points, to 4.56 percent.

Weekly national mortgage survey
Results of Bankrate.com's Feb. 3, 2010, 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:5.15%4.55%4.56%
Change from last week:+0.02+0.01+0.02
Monthly payment:$900.94$1,266.46$841.92
Change from last week:+$2.03+$0.85+$1.96

In January, rates fell every week in Bankrate's mortgage survey after ending 2009 at 5.33 percent. That should put this rate rise in perspective: Although rates have gone up a little, they were quite a bit higher just five weeks ago.

Homebuyers have more to worry about than merely higher rates. There are multiple deadlines coming up that encourage people to buy and borrow now rather than later: The Federal Reserve plans to stop buying mortgage-backed securities, the Federal Housing Administration is raising mortgage insurance premiums, and the homebuyer tax credits will expire.

"Bottom line, if you are planning on buying a home in 2010, get out and see some homes this weekend and start previewing them on the Web," says Jim Sahnger, mortgage consultant for Palm Beach Financial Network in Stuart, Fla. "Also, contact your mortgage broker or lender and get preapproved."

Fed deadline

For more than a year, the Federal Reserve has been buying mortgage-backed securities. The Fed has said repeatedly that the goal was to keep mortgage rates down. It appears that the plan worked. In October 2008, the month before the Fed announced its mortgage-buying plan, the 30-year fixed averaged 6.49 percent in Bankrate's surveys. Last month, the 30-year fixed averaged 5.19 percent. (Graph the trend of mortgage interest rates.)

The Fed says it is gradually slowing its purchases of mortgage-backed securities and that it will stop buying them by the end of March. There are widely differing predictions of what will happen after the Fed withdraws from the mortgage market. Some predict that there won't be much change in rates; others predict that rates could rise a percentage point. The rough consensus is that rates will rise about half a percentage point, but not overnight. It might take a few weeks.

FHA premium increase

When you get an FHA-insured mortgage, you pay the premiums in two chunks: First, an upfront premium that is paid at closing, and then an additional premium every month. The FHA will raise the upfront premium in April. Right now the upfront premium is 1.75 percent of the sales price, andin April it will rise to 2.25 percent of the loan amount. That's a premium increase of $500 for every $100,000 borrowed.

Officially, the increase goes into effect April 5, a Monday. In practice, this means that your loan application has to be submitted to the FHA, and given a case number, by the end of business Friday, April 2. It's a good idea to get the ball rolling on the loan paperwork at least a day or two before that Friday deadline, in case you run into problems finding the financial documents you'll need.

Also in April, the FHA will reduce the "seller concessions" that it will allow. When the seller pays closing costs, or pays for discount points on the mortgage, that's a seller concession. Right now the FHA allows seller concessions worth up to 6 percent of the sales price. In April, the maximum seller concessions fall to 3 percent.

This limitation will affect homebuilders especially. Many builders offer to pay for closing costs and rate reductions if you use the builder's affiliated lender. Under these incentive programs, the builder might pay your closing costs and, on top of that, get you a loan with an interest rate of 3 percent in the first year, 4 percent in the second year, and 5 percent every year after that. But the FHA's limited seller concessions will mean that you can have either the paid closing costs, or the temporarily reduced mortgage rates, but not both.

Homebuyer tax credits

The first-time homebuyer tax credit of up to $8,000 and the move-up homebuyer tax credit of up to $6,500expire at the end of April. The home has to be under contract by then, and the deal has to close by the end of June.

To claim the tax credit, it's not too late to start looking for a house. But time's getting short. "We've got all kinds of homes available that we can close immediately," says Chris Karageorge, senior home loan adviser for Universal American Mortgage Co., a unit of Lennar Homes. By that, he means it's possible to go from offer to closing in two weeks.

But, Karageorge adds, "to be on the safe side, if I was going to do it" -- look for a house -- "I'd probably do it now."

If you're in the market for a mortgage or refinance, you can look for the best interest rate by searching Bankrate's rate tables.

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