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Mortgage rates hit 2nd lowest level of 2016

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Mortgage interest rates dipped for the first time in a month and fell to their second lowest level of 2016.

Rates first plummeted in late June after the so-called Brexit referendum in which United Kingdom voters signaled their wish to leave the European Union.

RATE SEARCH: Shop for the best mortgage rates today at Bankrate.

Since then rates have been “steadily creeping up from the low-3% to mid-3% range,” says Justin Lopatin, vice president of mortgage lending at PERL Mortgage in Chicago.

This week, rates gave up some of that increase.

Rates this week

This week, the benchmark 30-year fixed-rate mortgage fell to 3.56% from 3.63%, according to Bankrate’s weekly survey of large lenders. A year ago, it was 4.29%. Four weeks ago, the rate was 3.52%.

The mortgages in this week’s survey had an average total of 0.27 discount and origination points.

Over the past 52 weeks, the 30-year fixed has averaged 3.89%. This week’s rate is 0.33 percentage points lower than the 52-week average. 

  • The benchmark 15-year fixed-rate mortgage fell to 2.83% from 2.89%.
  • The benchmark 5/1 adjustable-rate mortgage fell to 3.01% from 3.08%.
  • The benchmark 30-year fixed-rate jumbo mortgage fell to 3.62% from 3.69%.

Lopatin says the combination of low mortgage rates and high apartment rents has enticed “an influx of millennials” into the housing market. He expects this window of homebuying opportunity to remain open for another 12-18 months, judging in part by builders’ optimistic construction of new condominium high-rises in Chicago.

Weekly national mortgage survey

This week’s rate: 3.56% 2.83% 3.01%
Change from last week: -0.07 -0.06 -0.07
Monthly payment: $746.46 $1,126.02 $696.54
Change from last week: -$6.49 -$4.73 -$6.25

Mortgage analysis

Low-down loans

In related news, Fannie Mae last week announced some enhancements to its HomeReady Mortgage, which allows a down payment of just 3% of the loan amount. The tweaks are intended to make these loans available to more people who need an affordable option.

Lopatin says the 3% down payment loan program might appeal to borrowers in some under-served parts of the United States, though he adds that in Chicago, borrowers are more likely to prefer a 5% down conforming loan or 3.5% down FHA loan, insured by the Federal Housing Administration.

That comparison forces people to realize that 2% of extra down payment is insignificant when you think about the drastically higher interest rate for the 3% option, Lopatin says.

The FHA loan makes sense if the borrower’s credit score is also on the low side because with a small down payment and lower credit score, the FHA rate and mortgage insurance premium will be more affordable for the borrower than the conforming loan rate and private mortgage insurance, Lopatin explains.

From a monthly payment standpoint, 97% financing doesn’t always get you the best option because of the higher rate and (because) individuals who don’t have enough to put down usually have some credit challenges, he says.

Borrowers should shop around and compare the loans, rates and fees they’re offered to find a combination that fits their personal situation.

RATE SEARCH: Shop for the best mortgage rates today at Bankrate.

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