Record-breaking low mortgage rates
Friday, February 3rd, 2012Mortgage rates for American homes are headed toward an all-time low, according to Freddie Mac’s latest Primary Mortgage Market Survey. The recent survey showed astoundingly low rates across the board, making home buying affordable for consumers across the country. In fact, the average 30-year fixed-rate mortgage is under 4.00 percent and has been for the past month and a half.
This time last year the 30-year fixed-rate mortgage averaged 4.71 percent, which is an amazing interest rate to get on a home loan. But now the average has dropped even further, as the recent survey reveals, to 3.89 percent. This same trend holds for the 15-year FRM. It currently sits at 3.16 percent, whereas this time last year it averaged 4.08 percent. As mentioned before, these rates reflect an affordability for homebuyers that was all but unheard of before.
In addition to these numbers, the 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) recently averaged 2.8 percent (down almost a whole percentage point from its average of 3.72 percent in last year). Likewise the 1-year Treasury-indexed ARM recently averaged 2.76 percent, which is a significant drop from the same time last year when it was 3.23 percent.
How can we explain the recent dip in mortgage rates?
“Mortgage rates eased slightly this week to all-time record lows following mixed indicators in the labor market,” says Frank Nothaft, the vice president and chief economist of Freddie Mac. “Although the economy added 1.6 million jobs in 2011, which was the most since 2006, the unemployment rate remained historically elevated.”
Armed with this data, how can you take advantage as a home buyer in the current housing market?
According to the senior vice president of Single-Family Sourcing and Securitization for Freddie Mac, there are four steps that every potential home buyer must take before trying to secure financing for the purhcase of a new home…
- Find out current credit score and history. This way you know exactly where you stand and can avoid any potential pitfalls down the road. If there are credit issues from the past or you have no credit history to speak of, it’s imperative to contact a HUD-approved housing counselor for advice on how to build and maintain a healthy credit score.
- Get the appropriate documentation together. Lenders are going to be looking for the proper documentation to verify income (e.g. W-2 forms, tax returns, employment history), credit history and assets (e.g. banks statements, other financial accounts).
- Coordinate with your lender to review your situation. Review income, expenses and financial goals to determine which mortgage optioins you will qualify for. The biggest question that needs to be answered is whether you’ll be best served with a fixed- or adjustable-rate mortgage. Know your options.
- Get a pre-approval letter. Talk with your lender about applying for a mortgage and getting proof of pre-approval. This letter can be submitted with any offer you put on a home to show the sellers you are a serious buyer with the financial backing to purchase their property.
This is a buyers’ market but one still has to practice due dilligence. Make sure to do your research, consult the appropriate professionals, work within your budget and get your finances in order. There are great deals on the market and interest rates have never been more favorable. So it is a great time to buy in Chicago or anywhere else you are looking to purchase a home.





