When Are Mortgage Rates Lowest?

We’re all looking for an angle, especially if it’ll save us some money.

Whether it’s a stock market trend, a home price trend, or a mortgage rate trend, someone always claims to have unlocked the code.

Unfortunately, it’s usually all nonsense, or predicated on the belief that what happened in the past will occur again in the future.

Sometimes history repeats itself, sometimes it doesn’t. We probably only hear about the times when it does because it makes the individual behind it sound like a genius.

In reality, it’s very difficult to predict anything, even the weather, so when it comes to complex stuff like mortgage interest rates, success rates probably move a lot lower.

That being said, I set out to see if there were any mortgage rate trends we could glean from available data, using Freddie Mac’s historical mortgage rates that go back to 1971.

Using 50 years of data, you would think some trends would appear, right?

Were mortgage rates lower in certain months, higher during others, or is it all just random? Let’s find out.

What Time of Year Are Mortgage Rates the Lowest?

mortgage rates by month

I looked at monthly averages for the 30-year fixed-rate mortgage over the past three decades to determine if there’s a winning month out there.

It turns out there is a month when mortgage rates are lowest, and as you might expect, it’s at a time when most folks wouldn’t even be thinking about purchasing a home or refinancing an existing mortgage.

Yes, it’s December. You know, when individuals are more concerned with holiday shopping and traveling to see family then calling up a mortgage lender.

This could explain why mortgage rates are lowest in December. If you recall, lenders pass on bigger discounts to consumers when things are slow.

As alluded to, December is always going to be a slow month for mortgage lenders, which probably has something to do with the discount seen over the past 30 years.

Keep an Eye Out for a Mortgage Rate Sale

  • Mortgage lenders operate just like other types of businesses selling products or goods
  • They price their loans based on expected profit margin and operational costs
  • If their business slows down they might be inclined to lower the price (or interest rate)
  • But if they’re doing a lot of business (or even too busy) they might keep rates artificially high

Similar to any other company out there selling goods, there are “sales” at certain times throughout the year, and also times when prices are marked up.

As you might expect, if a company is trying to move product, in this case home loans, what do they do? They lower the price to drive business.

Mortgage lenders able to lower the price, or rate, because they’ve got a margin built in to their market rate.

This margin acts as their profit, minus operational costs. Sure,they may not make as much per loan if they lower rates for consumers, but they could make up for it on volume.

Instead of closing one higher-priced loan, they might be happy to close three loans and earn more on aggregate. So they have wiggle room to play with rates a bit.

They can adjust them lower when business is crawling, and simply maintain or raise them when their phone won’t stop ringing.

How Much Cheaper Can They Really Be?

  • While mortgage rates are measured in eighths of a percent (0.125%)
  • Which may look or sound like absolutely nothing when comparing rates
  • The small difference can be exponential because you pay the mortgage each month for years (possibly 30!)
  • This explains why even a marginal difference in rate can amount of thousands of dollars over time

Okay, so we know rates vary throughout the year, and even a small difference in rate can be very meaningful. But how much can you really save?

While not massive by any stretch, you might be able to get a rate .25% lower in December versus April. Same goes for October and November compared to spring.

If we’re talking about a $300,000 loan amount, a rate of 2.75% vs. 3% is the difference of roughly $40 per month, or nearly $500 per year.

Keep your mortgage for a decade and you’ll pay nearly $5,000 more over that period.

Are You Overpaying for Your Home Loan and House in April?

  • The most common time to buy a home is in spring, namely April
  • This is when prospective buyers get serious and make offers
  • It’s also when more home sellers finally agree to list their properties
  • But it might be cheaper to buy a home during fall or winter

Now speaking of April, that month tends to be prime time for home buying historically, which explains the lack of a discount.

The same goes for buying a home during April – it’s a lot less common to see a price reduction during spring than it is during fall or winter.

It all begs the question; should we buy homes when prices, competition, and interest rates are lowest? Probably.

Just one problem – there tends to be less available inventory in the fall and winter months as well. But if you do come across something you like, it could be a great time to snag a deal.

In other words, you should always be looking, even if it’s not the ideal time to move.

If you’re refinancing a mortgage, there are less obstacles in December since you’ve already got a house.

To sweeten the deal, lenders probably aren’t busy, so you’ll breeze through underwriting a lot quicker. And you could receive a little more attention from your loan officer.

Should I Wait Until December to Get a Mortgage?

In short, probably not. While December had the lowest mortgage rates on average over the past 30 years, there were plenty of years when rates were higher in December compared to other months.

Take 2018, where the 30-year fixed averaged 4.03% in January and 4.64% in December.

Same goes for 2015 and 2016, when rates were markedly higher in December versus the beginning of the year.

However, in 2020 the 30-year fixed averaged 3.31% in April and 2.68% in December, which is a difference of 0.63%. That can equate to thousands of dollars in savings.

All in all, you’re probably better off paying attention to what’s going on in economy if you want to predict the direction of mortgage rates.

The trend (moving up or down over a period of time) might be more important than the month of year.

Simply put, bad economic news generally leads to lower mortgage rates, whereas positive news tends to propel interest rates higher.

Time of year aside, you might be able to save even more on your mortgage simply by gathering quotes from more than one lender.

Ultimately, timing doesn’t seem to be the biggest driver of rates, nor is it something most of us can control anyway.

(photo: Marco Verch)

Lock in a lower rate.

Source: thetruthaboutmortgage.com

Zillow: Expect another record year for home sales

Zillow’s 2021 housing forecast echoes the projections of other industry experts of a rapid acceleration of home value appreciation, with numbers anticipated to be even higher than in 2020.

According to Zillow’s Home Value Index, the company expects seasonally adjusted home values to increase by 3.7% from December 2020 to March 2021, and by 10.5% through December 2021. It also predicts home value appreciation to peak in June 2021 at 13.5%.

In fact, the company has already upped its December 2020 forecast: Zillow initially expected a 10.3% increase in home values through November 2021.

Approximately 5.6 million existing homes were sold in 2020, a 5.3% increase from 2019, according to officials. Zillow predicts 6.82 million existing home sales in 2021, the most recorded in a single calendar year since 2005 and a 21.1% increase from 2020.

Quarterly Zillow Home Value Index growth as of December 2020 was 3.2%, the strongest three-month appreciation since 1996.

“Home values rose sharply near the end of the year at their fastest quarterly rate on record,” said Jeff Tucker, Zillow senior economist. “Sales are taking place at a rapid clip, as momentum gathering in the market since June is still pushing forward at full force and is expected to continue for the foreseeable future.”

Tucker added that record-low mortgage rates are keeping buyers coming to the table – despite rising prices.

“[The low rates] are keeping monthly payments in reach,” he said.

Although mortgage rates are expected to rise in 2021, it’s not out of the realm of possibility that sub-3% rates become the norm following the economic turmoil caused by the COVID0-19 pandemic.

Rates fell to 3.13% in June before bottoming out around 2.67% by the end of the year.

Rounding out the 2020 data, the seasonally adjusted annualized rate of existing home sales in November was 6.69 million – up 25.8% from November 2019. Zillow officials expect this rate to remain high – above 6.65 million – through 2021. 

“Our bullish outlook for sales and home values is driven by the current strength of the home-buying market and our expectation that low mortgage rates, demographic tailwinds and an improving economy will continue to prop up market competition,” Tucker said.

Source: housingwire.com

Understanding the seasonal patterns of mortgage rates

Much like the changing of the calendar, buying and selling homes follows a seasonality that that those in mortgage and real estate have grown accustomed to. But a recent study from tech startup Haus found that mortgage rates can also be seasonal, and borrowers can benefit from understanding that rhythm.

Analyzing over 8.5 million mortgage originations between 2012 and 2018 from Freddie Mac’s Single-Family Loan-Level dataset, Haus found that the sweet spot for rates is typically in January, when mortgage originations also typically slump.

Ralph McLaughlin, chief economist at Haus, explained the correlation. “So, what do lenders have to do to be competitive? They lower their rates. But let’s looks at when Treasury rates were dropping like crazy early in 2020. What that usually means is that mortgage rates would also drop like crazy. But at first, mortgage rates didn’t drop. And it’s because there was such a flood of people looking to refinance that lenders couldn’t keep up.

“They couldn’t keep up with demand and so if they couldn’t keep up with demand that allows them to keep their prices relatively high,” McLaughlin said.

2020 was an outlier, with mortgage rates dropping to record lows on 16 different occasions. However, many economists expect as the economy begins its post-pandemic recovery, rates will also begin to stabilize to a more predictable pattern.

“We forecast rates to remain relatively low this year as the Federal Reserve keeps interest rates anchored near zero for a longer period of time, if needed until the economy rebounds,” said Sam Khater, Freddie Mac’s chief economist.

If rates stay low, the Haus study estimates that borrowers buying houses between $400,000 and $500,000 are going to reap the greatest reward – averaging a discount of 23 basis points compared to cheaper loans. That’s because it costs the same to originate a loan that is half a million dollars as it does $200,000, but the latter doesn’t involve as much return.

“You’re not making as much as you would on that more expensive mortgage, obviously, in order to cover some of those fixed costs, so lenders actually increase rates on the lower end of mortgage originations.” McLaughlin said.

An updated market outlook from Zillow expects seasonally adjusted home values to increase by 3.7% from December 2020 to March 2021, and by 10.5% through December 2021.

But even if lenders do inflate prices on a lower mortgage, borrowers can gain an advantage by playing the field. Across the largest lenders in the country (the 100 largest by volume of originations), Haus found on average a 75-basis point spread between the most expensive and least expensive lender. Taking into account size of down payment, existing debt and credit score, the study found that for the same borrower, a potential mortgage rate could, for example, average anywhere from 3.25% to 4%.

So how do lenders retain a potential borrower if they can’t match the price? McLaughlin said they are speculating that the convenience and experience borrowers play may be a leading factor. Those lenders who invest in digital technology and digital documentation are going to have the upper hand.

“It’s like, how much are you willing to pay for a hotel? I don’t think there’s a Ritz Carlton of mortgages or a Motel 6 of mortgages, but nonetheless there is variation and even if a rate is cheaper, a lot borrowers are thinking about quality,” McLaughlin said.

Surprisingly, a borrower who lowers their debt to income ratio doesn’t move the needle much on rates. According to the study, borrowers with a DTI below 36% (considered a “good” DTI), on average have mortgage rates that are just 3-6 basis points lower than borrowers with a DTI above 43% (considered “high”).

That said, recent changes implemented by the Consumer Finance Protection Bureau have removed DTI requirements from qualified mortgages. Haus estimates the ongoing impact that DTI will have on mortgage pricing is also likely to fall.

Source: housingwire.com

What is a home equity loan and how does it work?

Make the most of your home equity

As home values increase, so does the amount of equity available to homeowners.

But home equity isn’t liquid wealth; the money is tied up in your home. To access your home’s value, you either need to sell or take out a loan against the property.

One option is a cash-out refinance, which lets you tap equity and refinance your existing loan, sometimes to a lower rate.

But what if you’re happy with your current mortgage? Another option is a home equity loan, or ‘second mortgage,’ which lets you cash-out without a full refinance. Here’s what you need to know.

Check your home equity financing options (Jan 23rd, 2021)


In this article (Skip to…)


What is a home
equity loan?

A home equity loan or ‘HEL’ is
a type of mortgage, often called a ‘second mortgage,’ that lets you draw on
your home equity by borrowing against the home’s value.

Unlike a cash-out refinance, a home equity loan lets you cash-out without touching your primary mortgage loan. So if you already have a great interest rate, or you’re almost finished repaying the original loan, you can leave its terms intact.

A home equity loan can also help homeowners who own their homes outright and don’t want to refinance the entire home value just to access equity.  

How home
equity loans work

Home equity loans are mortgages just like your original home loan. They
are secured by your property, and if you don’t make your loan payments,
you can lose your house to foreclosure. Just like you can with a “regular”
mortgage.

A home equity loan can be
structured to deliver a lump sum of cash at closing, or as a line
of credit that can be tapped and repaid, kind of like a credit card. The second type is known as a
home equity line of credit (HELOC).

If your interest rate is fixed
(this is the norm), you’ll make equal monthly payments over the loan’s term
until it’s paid off.

The fixed rate and payment make
the HEL easier to include in your budget than a HELOC, whose rate and
payments can change over the course of the loan.

A home equity loan can be a good idea when
you need the full loan amount at once and want a fixed interest
rate.

For example, if you wanted to
consolidate several credit card accounts into a single loan, or if you needed to
pay a contractor upfront for a major renovation, a HEL could be a
great choice.

Check your home equity financing options (Jan 23rd, 2021)

How much
can you borrow on a home equity loan?

How much cash you can borrow through a home equity loan
depends on your creditworthiness and the value of your home.

To find your possible loan amount, start by subtracting the
amount you owe on your existing mortgage from the market value of your home. For
example, if your home is valued at $300,000 and you owe $150,000 on your
existing mortgage, you own the remaining $150,000 in home equity.

Most of the time you can’t borrow the full amount of equity,
but you may be able to tap 75-90% of it.

In the example above, that means you could likely borrow between
$112,500 and $135,000, minus closing costs.

You could use this money for home improvements, debt consolidation, or to make a down payment on a vacation home or investment property.

Home equity
loan interest rates

When you apply for home equity
financing, expect higher interest rates than you’d get on a first mortgage due
to the extra risk these loans pose for lenders.

Fixed home equity interest rates for borrowers with excellent credit are about 1.5% higher than current 15-year fixed mortgage rates.

Home equity interest rates vary
more widely than mainstream first mortgage rates, and your credit score has
more impact on the rate you pay.

For example, an 80-point difference in FICO
scores can create a 6% difference in a home equity
interest rate.

Home equity lines of credit
(HELOCs) have variable interest rates. This means your monthly payment depends
on your loan balance and the current interest rate. Your payment and rate can
change from month to month.

Home equity loans can have
variable interest rates, but most of the time the rate and payment are fixed.

About home equity lines of credit (HELOCs)

The home equity line of credit, or
HELOC, offers more flexibility than a home equity loan. But it makes
budgeting harder.

HELOCs have a ‘draw period’
in which you’re allowed to tap the loan amount up to your
credit limit. You can withdraw and repay funds as needed during
these first years.

There is a minimum payment —
usually the amount needed to cover the interest due that month. At any given
time, you pay interest only on the amount of the balance you
use.

When the draw period
ends, you can no longer tap the credit line and must repay it over a predetermined number of
years. With its variable
interest rate, your payment could change every month.

Some HELOCs allow
you to fix your interest rate when you enter the repayment period. These are
called “convertible” HELOCs.

HELOCs are ideal loan options for
expenses that will be spread over a longer period of time, or
as a source of emergency cash.

For instance, you might take a
HELOC to serve as an emergency fund for your business. Or you could use it to
pay college tuition twice a year. HELOCs are also great for home improvements
that take place in stages over an extended period of time.

How
second mortgages work

If you’re considering a home equity loan or home equity line of credit, it’s important to understand how these ‘second mortgages’ work.

One important point is that you keep your existing mortgage
intact. You continue making payments on it as you’ve always done.

The HEL or HELOC is a second, separate loan with additional
payments due each month. So you’d have two lenders and two loans to make
payments on. 

Lenders consider second mortgages to be riskier than first
mortgages.

The primary mortgage lender gets paid first if a loan defaults and
the home is sold in a foreclosure. The second mortgage lender — which holds the
HEL or HELOC — may get paid less than it’s owed. Or it may not get paid at all.
(A second mortgage lender is also known as a “junior lien holder.”)

Due to this extra risk, home equity loans charge higher interest
rates than a primary mortgage. A cash-out refinance might come with lower rates.

Home equity loans are also a bit harder to qualify for. You’ll typically need a credit score of at least 680-700 for a home equity loan, as opposed to 600-620 for a cash-out refi.

More
differences between first and second mortgages

Besides the interest rate, there
are a few other distinctions between first and second mortgages. Second mortgages have:

  • Shorter loan terms — Home equity loans and lines of
    credit can have terms ranging from 5 to 20 years, with 15
    years being the most common. The shorter repayment time reduces risk to lenders
  • Smaller loan amounts
    Many first
    mortgage programs allow you to finance 95%, 97%, or
    even 100% of your home’s purchase price. Most home
    equity lenders max out your loan-to-value at 80% to 90% of your equity
  • Lower fees — While some still charge origination fees, HELOC
    lenders, for example, often absorb most or all of
    the fees. Home equity loan fees for title insurance and escrow are usually much
    lower than those for first mortgages.
  • Faster processing — Home
    equity loans usually close much faster than first mortgages. You may get your
    money in a couple of weeks, as opposed to 1-2 months

Also, your second mortgage lender may not require a full appraisal. This could save hundreds of dollars in closing costs compared to getting a first mortgage.

Cash-out refinance vs. home equity loan

Home equity loans and lines of
credit aren’t the only ways to borrow against the cash value of your home.

Some homeowners prefer a cash-out refinance loan, which has a few advantages:

  • One loan — Since cash-out refinancing replaces your existing mortgage while also unlocking equity, you’d have only one mortgage loan instead of two
  • Lower interest rates — Cash-out refinance rates are lower than home equity loan or HELOC rates. In addition, since you’d be replacing your existing mortgage with a new mortgage, all of your home debt could be re-cast at today’s lower interest rates
  • Opportunity to pay off the house early — Shorter loan terms require higher loan payments each month, but they can save a lot in interest charges over the life of your loan. A cash-out refinance offers an opportunity to shorten your current loan term from a 30-year fixed to a 15-year fixed mortgage, for example

Cash-out refinancing isn’t for everyone. If your first mortgage is
almost paid off, for example, you’re probably better off with a second
mortgage.

If your existing mortgage rate is already near today’s rates, your savings from refinancing might not eclipse the closing costs and other borrowing fees. In that case, a second mortgage is probably the way to go.

Check your cash-out refinance options (Jan 23rd, 2021)

Other alternatives to home equity loans

If you recently bought or refinanced your home, you probably
don’t have enough equity built up to warrant a second mortgage or a cash-out
refinance just yet.

In this case, you’ll need to wait until your home’s market
value increases and your original mortgage balance decreases, generating enough
equity to qualify for a new loan from a bank or credit union.

But what if you need cash sooner? You may want to consider:

Personal loans

Personal loans do not require backing from home equity. They
are ‘unsecured’ loans, requiring only a high enough credit score and income to
pay back the loan.

Since the loan is not secured against your property as
collateral, interest rates are much higher.

You can find personal loan amounts up to $100,000, but if you
have bad credit or a high debt-to-income ratio, you’ll have limited options.

Applicants with excellent credit histories have more loan
options, but since personal loans require no collateral, they can’t compete
with the low interest rates you’d get on a secured mortgage.

And unlike a mortgage, the interest you pay on a personal loan
is not tax-deductible, even if you use the loan to fund home improvements.

Credit cards

With their annual fees and high
annual percentage rates, credit cards should be a last resort for long-term
borrowers — unless you can get a no-interest credit card and pay it off before
the promotional rate expires.

If a credit card offers a 0% APR
for 18 months, for example, you may be able to keep the card balance until
you’re able to get a second mortgage loan to pay off the card. If you time it
right, you’ll avoid the credit card’s punitive charges.

However, this is a risky strategy. If you don’t have enough equity or a sufficient credit score to qualify for a cash-out mortgage now, it could be difficult to improve your financial situation enough to get one before the credit card promotion expires. This could land you with high credit card debt and no good way to pay it off.

What are
today’s home equity mortgage rates?

As noted above, home equity loan
rates are more sensitive to your credit history than first
mortgages. Rates can also vary more between lenders, which makes it important
to shop for a good deal.

To get an accurate quote, you’ll
need to provide an estimate of your credit score and your property value.

Verify your new rate (Jan 23rd, 2021)

Source: themortgagereports.com

Mortgage rates hold steady at 2.77%

The average mortgage rate for a 30-year fixed loan fell two basis points last week to 2.77%, according to Freddie Mac’s Primary Mortgage Market Survey. Now 12 basis points above the record low set Jan. 7, rates more closely resemble those seen over two months ago.

The 15-year fixed mortgage rate also shifted downward to 2.21 from 2.23 the week prior.

With last week’s data in, mortgage rates have now managed to hover below 3% for nearly six months and have fueled purchase and refinance activity to record-setting levels amid a global health crisis.

But political and economic factors are causing some fluctuation in those rates, putting upward pressure on Treasury yields, said Sam Khater, Freddie Mac’s chief economist.

“However, we forecast rates to remain relatively low this year as the Federal Reserve keeps interest rates anchored near zero for a longer period of time, if needed until the economy rebounds,” Khater said.


Leveraging eClosings to effectively manage increased loan volumes

With no end in sight to record low rates and the increased loan volume, lenders must streamline workflows and accelerate time to close. Evolving from traditional closings to hybrid closings to full eClosings can help lenders process more loans at a faster pace without overwhelming their resources.

Presented by: SimpleNexus

Freddie Mac’s quarterly forecast estimates that the average 30-year fixed-rate mortgage will be 2.9% in 2021 and 3.2% in 2022. However, some economists believe a slow upward path for rates is inevitable in 2021.

Despite the Fed’s vow to keep interest rates low until 2022, Mike Fratantoni, chief economist at the Mortgage Bankers Association, said recent Fed speeches revealed they are less committed to asset purchases, and wouldn’t be surprised if said purchases were reduced by the end of year.

“While for some time people thought that mortgage rates might be less impacted than Treasury rates, the spread between mortgage rates and Treasury rates has narrowed substantially. Going forward, any increases in Treasury rates are really going to be matched by increases in mortgage rates,” Fratantoni said.

The Treasury is now expected to auction close to $3 trillion worth of bonds this year, and with that amount of supply hitting the market, a historically inverse relationship will see bond prices dropping and yields on the rise.

Source: housingwire.com

Mortgage applications decrease as rising rates temper refi volume

Mortgage applications decreased 1.9% from one week earlier as rising rates started to affect refinance activity, according to the Mortgage Bankers Association.

Still, refinancings predominate the market. The MBA’s Weekly Mortgage Applications Survey for the week ending Jan. 15 found that while the refinance index decreased 5% from the previous week, it was 87% higher than the same week one year ago. The refinance share of mortgage activity decreased to 72.3% of total applications from 74.8% the previous week.

“Mortgage rates increased across the board last week, with the 30-year fixed rate rising to 2.92% — its highest level since November 2020 — and the 15-year fixed rate increasing for the first time in seven weeks to 2.48%. Market expectations of a larger than anticipated fiscal relief package, which is expected to further boost economic growth and lower unemployment, have driven Treasury yields higher the last two weeks,” Joel Kan, the MBA’s associate vice president of economic and industry forecasting, said in a press release. “After a post-holiday surge of refinances, higher rates chipped away at demand. There was a 5% drop in refinance activity, driven by a 13.5% pullback in government refinances.”

The seasonally adjusted purchase index increased 3% from one week earlier, while the unadjusted purchase index increased 9% compared with the previous week and was 15% higher than the same week one year ago.

“Homebuyers in early 2021 continue to seek newer, larger homes. The average loan size for purchase loans jumped to $384,000, the second highest level in the survey,” Kan added. The average purchase loan size one week ago was $374,700.

Adjustable-rate mortgage activity increased to 2.1% from 1.6% of total applications, while the share of Federal Housing Administration-insured loan applications decreased to 9.3% from 9.6% the week prior.

Veterans Affairs-guaranteed loans saw their share decreased to 13.8% from 15.8% and the U.S. Department of Agriculture/Rural Development share remained unchanged from 0.4% the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) increased 4 basis points to 2.92%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400), the average contract rate increased 2 basis points to 3.19%.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased 8 basis points to 3.01%. For 15-year fixed-rate mortgages, the average increased 9 basis points to 2.48%. The average contract interest rate for 5/1 ARMs increased to 2.76% from 2.66%.

Source: nationalmortgagenews.com

Mortgage applications decrease as rates move higher

Mortgage applications decreased 1.9% for the week ending Jan. 15 from one week earlier, per data from the Mortgage Bankers Association’s weekly survey. The drop comes after a robust 16.7% jump in applications the prior week.

The 30-year fixed rate rose to 2.92%, its highest level since last November. Additionally, the 15-year fixed rate increased for the first time in seven weeks to 2.48%.

“Market expectations of a larger than anticipated fiscal relief package, which is expected to further boost economic growth and lower unemployment, have driven Treasury yields higher the last two weeks,” said Joel Kan, MBA associate vice president of economic and industry forecasting.

“After a post-holiday surge of refinances, higher rates chipped away at demand,” Kan said. “There was a 5% drop in refinance activity, driven by a 13.5% pullback in government refinances.”

The seasonally adjusted purchase index increased 3% from one week earlier. The unadjusted purchase index increased 9% compared with the previous week, and was 15% higher than the same week one year ago.

“Homebuyers in early 2021 continue to seek newer, larger homes,” Kan said. “The average loan size for purchase loans jumped to $384,000, the second highest level in the survey.”

The FHA share of total mortgage applications decreased to 9.3% from 9.6% the week prior. The VA share of total mortgage applications increased to 13.8% from 15.8% the week prior.

Here is a more detailed breakdown of this week’s mortgage application data:

  • The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) increased to 2.92% from 2.88%
  • The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400) increased to 3.19% from 3.17%
  • The average contract interest rate for 30-year fixed-rate mortgages increased to 3.01% from 2.93%
  • The average contract interest rate for 15-year fixed-rate mortgages increased to 2.48% from 2.39%
  • The average contract interest rate for 5/1 ARMs increased to 2.76% from 2.66%

Source: housingwire.com

What Biden means for mortgage rates, housing policy, and real estate

What should home buyers and homeowners expect from Biden?

When it comes to housing policy, the Biden Administration is focused on affordability and accessability.

So far, Biden has proposed a $15,000 first-time home buyer tax credit, financial help for renters, and a reinvestment in fair housing policy.

Of course, none of these changes are guaranteed. They’ll have to pass through Congress first.

And some experts have speculated that while a Biden win could help bolster homeownership for the middle class, it could also mean higher mortgage rates.

But with COVID still the biggest driver of low rates in today’s market, any and all predictions on this front are far from certain.

Find and lock a low mortgage rate (Jan 19th, 2021)


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What does Biden’s win mean for mortgage interest rates? 

Mortgage rates have pushed lower and lower throughout 2020, making home buying more affordable and creating huge savings for refinancing homeowners.

In general, presidents support low rates. That’s partly because rock-bottom interest rates make home buying — and other consumer lending — more affordable and stimulate the economy. 

But presidents also like low rates because they reduce the massive interest cost represented by the national debt.

In the most recent fiscal year (FY2020 which ended September 30th), interest on the national debt cost taxpayers $522 billion. 

Presidents don’t set interest rates 

While Biden and Trump disagree on just about everything, no doubt they share some views regarding interest levels.

Presidents, however, do not set mortgage rates or any other interest rates. Neither does the Federal Reserve. 

In fact, the biggest driver of record-low mortgage rates in 2020 has been the coronavirus pandemic. 

Presidents do not set interest rates. If you want to know what will happen to mortgage rates, keep a close eye on the COVID pandemic and the progress of new vaccines.

Massive uncertainty and a recession pushed and kept interest rates down throughout 2020. 

But, as we’ve said for some time, an effective COVID vaccine could turn the tides.

And we did see rates spike earlier this week, when Pfizer announced the success of its vaccine trials so far. 

But we’re still far from having a vaccine available to the general public or life going back to ‘normal.’

As long as the economy remains in recovery mode, we can likely expect mortgage rates to continue in a band near or below 3%.

Find and lock a low mortgage rate (Jan 19th, 2021)

Refinance rates: The Adverse Market Refinance Fee is still looming

In August, a new 0.5 percent fee was announced for homeowners who want to refinance starting in late-2020. The fee would apply to mortgages sold to Fannie Mae and Freddie Mac.

Mortgage rates immediately rose following the news of the Adverse Market Refinance Fee, both for refinancing and purchase mortgages.

Originally set to begin September 1, the start date was pushed back to December 1. But that includes any loans not closed and delivered to Fannie or Freddie before the December 1 start date.

The Adverse Market Refinance Fee is already being applied to new refinance loans, thanks to the time it takes to close a loan and deliver it to Fannie Mae.

The purpose of the new fee, said the government, was to bulk-up Fannie Mae and Freddie Mac with $6 billion in new reserves and protect them against heightened risk due to COVID.

What was not said was that the government had already shifted almost $110 billion from the companies to the Treasury since 2008, money that could have been used for reserves.

In any case, unless the Biden Administration decides to kill the Adverse Market Refinance Fee, it will mean slightly higher rates on conventional refinance loans — and likely home purchase loans as well.

Homeowners refinancing with a government-backed FHA, VA, or USDA loan may not be affected.

Check your refinance rates. Start here (Jan 19th, 2021)

Biden’s $15,000 tax credit for first-time buyers

Biden has promised to pursue a $15,000 tax credit to bring more first-time buyers into the market. This is similar to a 2008 plan used to restart the housing market after the 2006-2008 mortgage meltdown.

The tax credit would directly benefit younger, first-time, and minority home buyers, who have traditionally had a harder time entering into the housing market. 

Unlike the first-time home buyer tax credits of 2008-2010, Biden’s proposed credit would be advanceable — “meaning,” as Biden’s website states, “that homebuyers receive the tax credit when they make the purchase instead of waiting to receive the assistance when they file taxes the following year.” 

The odds of passage for such a credit seem good, because real estate markets in all states would become more active.

And, potential home buyers currently blocked from the market could begin building equity and financial security — which benefits whole commiunities. 

However, the $15,000 first-time home buyer tax credit is not guaranteed. It would need to be passed by Congress, which controls U.S. tax policy. 

Biden’s renters tax credit

Similarly, Biden has raised the idea of a renter’s tax credit that will limit rental and utility costs to 30 percent of an individual’s household income.

The goal is to protect renters from excessive housing costs and leave more room in their budgets for daily necessities and putting away savings. 

This proposal — and the $15,000 tax credit for first-time buyers — would require congressional approval and be part of a larger debate. 

Biden and the Federal Reserve

The Federal Reserve is run by a Board of Governors with seven members. Currently, two seats are vacant — though they may be filled with Trump nominees before year-end. The remaining five seats are held by four Republicans and one Democrat.

During his presidency, Biden will have the chance to fill five Board seats. He will also have the opportunity to name a new Fed chair to replace Jerome Powell.

The result could be a Federal Reserve with a lot more interest in jobs and unemployment and fewer worries about inflation. 

The Fed has been one of the major forces keeping mortgage rates down in 2020, and we can expect that trend to continue in 2021.

While the Federal Reserve doesn’t control mortgage rates, its actions can have a big impact on them.

The Fed’s low-rate policy and buying of mortgage-backed securities during the pandemic has been one of the major forces keeping mortgage rates down.

Based on its current policy stance, we can expect the Fed to keep rates low through at least 2021. And this will likely contribute to low mortgage rates as well.

For now, there’s no reason to believe the Biden Administration would change the Fed’s course on this matter.

Verify your new rate (Jan 19th, 2021)

What will happen to Fannie Mae and Freddie Mac?

In 2008 the government placed Fannie Mae and Freddie Mac under a conservatorship. This is fancy term means the government took over both companies.

Now, 12 years later, the new Administration is faced with the question of what to do with Fannie and Freddie.

The Trump Administration has recommended that Fannie Mae and Freddie Mac should be privatized. Shareholders and the government will debate the matter in this session of the Supreme Court.

However, this seems unlikely for several reasons.

First, because Fannie Mae and Freddie Mac each have enormous assets. They have been cash cows that have sent almost $110 billion to the Treasury since 2008, money that has offset annual deficits. 

Second, there is a real worry the tinkering with Fannie Mae and Freddie Mac would simply result in higher mortgage rates — perhaps a full percentage higher. 

This could deter home buyers and refinancers and slow the record year we’ve seen for U.S. homeownership.

Look for the new Administration to mount a wholesale replacement of the current leadership at the Federal Housing Finance Agency (FHFA).

Also, look for it to withdraw all privatization plans until the matter can be further studied. 

COVID-19 is still a major driver for interest rates

Looming over everything is COVID-19.

At the time of writing this, we have the announcement of great progress with a vaccine. If it’s safe and effective, this will be a major game-changer.

But regardless of how good it will take months to get a large-scale vaccine program in place. Meanwhile, new cases are topping 100,000 per day. New hospitalization and death levels will follow. 

Will the new Administration be able to get widespread support for a quicker solution, the use of masks, social distancing, and hand-washing?

In Taiwan, for example, a low-tech approach to virus control has meant “200 days without any domestically transmitted cases of COVID-19,” according to the Voice of America.

If the U.S. adopts stricter practices under a new Administration, we could potentially see a drop in cases and — eventually — a more wholesale return to ‘normal.’ (Or whatever the new normal is.)

That might be bad news for mortgage rates, but it would be a huge win for Americans and the economy.

In conclusion…

In the end, much of what the new Biden Administration does or does not accomplish will depend on who controls Congress.

The House is firmly in Democratic hands. However, we won’t know until January — after the runoff elections in Georgia — whether the Senate will be controlled by Democrats or Republicans.

In neither case is Senate support for Biden’s policies automatic or assured. By January we will know much more.  

For now, mortgage rates continue to hover near all-time lows.

Despite a small spike after the news of a potential COVID vaccine, rates are still in the 3% range.

That means increased affordability for home buyers. And it means huge savings for refinancers — especially those with good gredit and fair bit of equity.

Since rates rest on the economy and not the presidency, we can likely expect these low mortgage rates to continue until we see a much bigger shift toward post-pandemic recovery.

Verify your new rate (Jan 19th, 2021)

Source: themortgagereports.com

Why are mortgage rates going up? Biden, vaccines, and interest rates

Mortgage rates are on the rise

The start of the year saw another drop in mortgage rates, with the average 30-year fixed rate falling to 2.65% — its lowest low ever, according to Freddie Mac.

But then interest rates reversed.

The average 30-year mortgage rate spiked to 2.79% on January 14, per Freddie Mac’s survey. Other sources reported averages as high as 2.88% on the same day.

Experts predict rates will keep on climbing in 2021.

The change should be modest — with 30-year rates in the mid-3% range, at worst — but the heyday of new record lows every week could be ending.

Check your mortgage rates today (Jan 18th, 2021)

Just how much did mortgage rates rise?

There’s no question mortgage interest rates are ticking up. But how much they’ve increased depends on who you ask.

Freddie Mac, the industry’s go-to for current mortgage rates, reports a relatively modest spike of 0.14%. It also showed rates pushing downward until last week.

But other sources paint a different picture.

Mortgage News Daily, for one, was already reporting 30-year rates at 2.86% on the same day Freddie listed its lowest-low of 2.65%.

So which source is right? Both of them are, in a way.

Differences in rate reporting are common due to companies’ different survey practices. They can also vary based on whether the source looks at purchase or refinance mortgages.

Remember that in the third quarter of 2020, the Federal Housing Finance Agency (FHFA) instituted an Adverse Market Refinance Fee of $500 per $100,000 borrowed — which has led to higher rates on most refinance loans.

The other thing to keep in mind is that rates in the news are averages. That means borrowers with good credentials can often still get lower rates than what’s shown.

So even though interest rates have ticked up, the ultra-lows of the last few weeks aren’t completely gone.

Check your mortgage rates (Jan 18th, 2021)

Why are mortgage rates going up? 

The short answer is that mortgage rates are going up because the economy is starting to have a more positive outlook on post-COVID recovery.

Coronavirus has been the major force keeping rates low over the past year. The closer we get to widespread vaccination — and the better our economic outlook as a result — the higher rates will go.

Although the U.S. is still at a critical stage with the virus, and far from tangible recovery, we’re finally starting to see a path forward.

This is largely due to Biden’s win, as well as the Georgia runoff election in which Democrats Raphael Warnock and Jon Ossoff won Senate seats. 

The impact of Biden and Senate Democrat wins

Current mortgage rate movements are due partly to the fluidity of the political and economic situation in the U.S., as the country prepares for a transition from the Trump administration to the Biden White House on January 20.

President-Elect Joe Biden has signaled that he wants to implement a $1.9 trillion stimulus plan to jumpstart the economy, and the Democratic wins in Georgia give him a Senate majority that will likely aid his efforts. 

Although Biden’s proposed stimulus plan has drawn criticism that relief checks of even $2,000 are unlikely to do much for the economy, the aim of the plan is to ease the country’s economic burden and spur spending and growth.

Economic growth would likely raise mortgage rates as different sectors rebound.

Mortgage Professional America Magazine also reported that stimulus spending could increase inflation, which would drive up mortgage rates as well. 

Keeping an eye on the 10-Year Treasury

Eli Sklar, senior loan consultant with loanDepot, pointed to the Ten-Year Treasury as an indicator of an improving economy and a signal that rates will rise in the coming year. 

“The Ten-Year Treasury’s price, which is a big indicator of mortgage rates, is inversely related to how the market is doing. As the market continues to do well, the Ten-Year Treasury’s value goes down because the Ten-Year Treasury is known as the safest investment,” Sklar said. 

A spike in investor interest in the Ten-Year Treasury as the economy cratered last year, combined with the Federal Reserve’s commitment to keep interest rates low, drove down mortgage rates.

But, Sklar said, as the economy recovers and people regain confidence in other types of investments, the Ten-Year Treasury will decline and mortgage rates will rise once again. 

Verify your new rate (Jan 18th, 2021)

How high will mortgage rates go in 2021?

Mortgage rates could continue to rise this year, particularly if the newly elected President Biden is able to enact a relief package that includes direct payments to taxpayers and other stimulus measures.

However, major housing agencies predict only a modest rise throuhout 2021, with 30-year mortgage rates staying in the high 2% or low 3% range on average.

Agency 30-Yr Rate Prediction
Fannie Mae 2.80%
Wells Fargo 2.89%
Freddie Mac 3.00%
National Assoc. of Home Builders 3.00%
National Assoc. of Realtors 3.20%
Mortgage Bankers Assoc. 3.30%
Average of all agencies 3.03%

As long as the pandemic forces the closure or reduced hours of businesses and strains the economy, it’s unlikely that mortgage rates will rise substantially. 

Even with widespread vaccine access, a recovery for individuals who suffered job losses or reduced hours, not to mention hard-hit small businesses, won’t happen overnight. 

“I do think it’s going to get better, but I think it’s worse than people think,” said Jarred Kessler, CEO of EasyKnock, a company that allows people to tap the equity in their homes through a sale-leaseback program.

Kessler says a slow but steady recovery as the service industry resurges and businesses and individuals get back on their feet “will be correlated with [rising] interest rates.”

As long as COVID strains the economy, it’s unlikely mortgage rates will rise substantially.

“I think we’re going to stay in a low interest rate environment for definitely the next two years,” Kessler said. 

Once the economy does begin to recover more consistently, however, increased yields on Treasury and other bonds will nudge interest rates higher as well, MarketWatch reports. 

Rates could also rise if the federal government stops, or at least eases, its pandemic policy of buying unlimited mortgage-backed securities.

If the economy begins steadily improving, the Federal Reserve may begin tapering those purchases, which could impact rates. However, Kessler said a formal announcement about a policy change seems unlikely in the immediate future. 

“It’s a Catch-22. If you do it, rates are going to go up and the Fed might be forced to backtrack a little bit,” Kessler said. “I think things are too fragile right now.” 

The bottom line is that although rates may rise somewhat in the coming months, the Federal Reserve projects that they will stay at historically low numbers through at least 2023. 

COVID vaccines will set the tone for mortgage interest rates

As a COVID-19 vaccine becomes more widely available, rates could also rise.

In theory, as more people get the vaccine and are able to safely eat at restaurants and attend large events, the economy will regain some of the momentum lost during the pandemic. 

However, a full recovery will take time, particularly if many opt not to get the vaccine due to fear of side effects.

The Pew Research Center found that as of December, 60% of Americans surveyed said they would likely take the vaccine once it became available to them. But 21% expressed misgivings about the vaccine and said they would probably not get it, even once more information became available about it. 

Although the percentage of people who need to be vaccinated in order to achieve herd immunity to COVID-19 is not yet known, according to the World Health Organization, it typically must be significantly higher than 60%.

While vaccine numbers and herd immunity might seem far removed from mortgage rates, they’re actually closely linked.

Remember that a weak economy means low mortgage rates, because investors pour money into the safe haven of mortgage-backed securities (MBS). This pushes rates down.

As the economy improves, which will gradually happen with widespread vaccination, investors will turn elsewhere and mortgage rates will once again increase.

Should I try to buy a house while rates are low? 

Buying a home is something you should decide based on your finances rather than what’s happening in the market.

As Kessler puts it, “I think you’re nuts if you’re trying to time it” for when mortgage rates are at record lows.  

“You’re in an unprecedented period of time where you can borrow for pretty much nothing right now. If you want to buy a home, don’t buy a home for a one-year trade. You should be thinking five, 10 years out,” he said.

It’s best to consider your credit score, savings, and the local real estate market, and make a decision based on those factors rather than the broader market. 

Even if you wait to buy a home until your finances improve, you’re still looking at historically low mortgage rates.

Even if you wait to buy until you’re in a better financial position and rates increase by then, you’re still looking at historic lows, Sklar said.

The important thing is to make sure you can afford your payments on the home you want, and to take a long-term view of what you’re paying. 

Sklar also noted that buyers should keep in mind that purchasing in a low-rate environment isn’t the only way to save on interest. You can also buy down your rate by paying discount points when you close on the home to reduce the amount of interest you’ll pay. 

Establishing good credit, keeping non-mortgage debts low, and saving up for a larger down payment can also help you qualify for a competitive rate.

Should I rush to lock a refinance rate?

Sklar said he advises clients against trying to “time” the market or waiting to lock in a rate in the hopes that it might go a little bit lower. 

“Do I expect it to go to zero? It’s not going to happen,” he said. “So if you don’t lock it, maybe you’ll lose a little bit from it going down. But there’s so much more to lose because if the rates go to simply 3%, you’ve just lost a tremendous amount of money.” 

Don’t worry if you’re not at the rate-lock stage yet. The low-rate window for refinancing isn’t over.

Mortgage rates are still near record lows and expected to stay there for the rest of 2021. If your current interest rate is in the 4-5% range or higher, you stand to save a lot even as rates are ticking up slightly.

Instead of focusing on timing the market, focus on how a mortgage refinance could benefit you.

“I think people are getting too fixed on the interest rate,” Sklar said. “I think people have to look at their actual savings.” 

Someone who wants to refinance, for instance, needs to calculate exactly how much they’ll save by applying for a new loan. If you’re only trimming your payments by a small amount each month, it may not be worth the time and closing costs to take out a new loan. 

Or maybe saving month-to-month isn’t your priority. If you want to cash-out home equity or pay off your mortgage early, timing the market for a rock-bottom rate might not be quite as important.

Whether you’re refinancing or buying a home, the right timing always depends on your unique situation.

Rates should stay low for the rest of the year at least, so lock when you’re ready and it makes sense for you to do so.

Verify your new rate (Jan 18th, 2021)

Source: themortgagereports.com

2021 Conforming loan limits range from $548K to over $1 million

Conforming loan limits increase to $548,250 for most areas

Conforming loan limits are on the rise.

Home buyers in most of the U.S. can now get a conforming loan up to $548,250 with just 3% down.

And the single-family loan limit is over $822,000 in high-cost areas.

Multifamily home buyers get a nice increase in
buying power, too, with limits for 2-4-unit properties topping $1 million in
some areas.

On top of this, we’re seeing ultra-low interest rates carry over from 2020 into 2021.

Put all it together, and you get incredible
purchase and refinance opportunities for home buyers and homeowners alike.

Check today’s conforming mortgage rates (Jan 17th, 2021)


In this article (Skip to…)


Freddie Mac and
Fannie Mae loan limits for 2021

Lending limits for conventional loans got a nice boost this year.

The Federal Housing Finance Agency (FHFA) determined home prices are up 7.42% on average across the nation.

It raised
conforming loan limits by the same percentage — a dollar increase of almost
$38,000 for the standard one-unit home. Multi-unit
properties got a similar boost.

Baseline conforming loan limits

Standard loan limits for 2021, which apply in most of the United States, are as follows:

  • 1-unit homes: $548,250
  • 2-unit homes: $702,000
  • 3-unit homes: $848,500
  • 4-unit homes: $1,054,500

Keep
in mind that these are only “standard” limits. In areas with high-cost real estate, buyers get significantly higher mortgage limits.

Maximum conforming loan limits

High-balance
conforming loan limits vary by county. They can fall within the following
ranges:

  • 1-unit homes: $548,250­–$822,375
  • 2-unit homes: $702,000–$1,053,000
  • 3-unit homes: $848,500–$1,272,750
  • 4-unit homes: $1,054,500–$1,581,750

Areas
such as Alameda County, California, Arlington, Virginia, and Jackson, Wyoming enjoy the maximum conforming loan limits, while cities like Seattle, Washington and
Baltimore, Maryland fall between the “floor” and the “ceiling.”

In
Alaska, Hawaii, Guam, and the U.S. Virgin Islands — which follow their own loan
limit rules — the baseline loan limit for 2021 is $822,375 for a one-unit
property.

Verify your home buying eligibility (Jan 17th, 2021)

Conforming
loan limits by county for 2021

What is a
mortgage loan limit?

A loan
limit is the maximum amount you can borrow
under certain mortgage programs.

There
is not just one loan limit, but many. Conventional mortgages adhere to one set
of loan limits, and FHA another.
VA loans did away with limits altogether in 2020.

In the world of conforming loans, Fannie Mae and Freddie
Mac limit “borrowable” amounts to keep their nationwide programs available to
those who need them.

For instance, Fannie Mae doesn’t want a $10 million loan
going through its system. That’s a lot of risk wrapped up in one
transaction, and the agency would rather issue many smaller loans to more home
buyers.

Fortunately,
loan limits are on the rise in 2021 to reflect rising
home prices across the country.

What
is a conforming loan?

A conforming loan is any mortgage that:

  1. Has a loan amount within local conforming loan limits
  2. Meets lending guidelines set by Fannie Mae and Freddie Mac

Mortgages within conforming loan limits are eligible to be backed by Fannie Mae and Freddie Mac, as long as the borrower meets basic criteria for credit score, income, down payment, and debt levels.

Conforming loans typically require:

  • A credit score of at least 620
  • A debt-to-income ratio below 43%
  • A down payment of at least 3%
  • Two-year history of stable employment and income

Exact conforming loan requirements
can vary by lender, but they all have to meet the minimum guidelines set by
Fannie and Freddie.

These
standards give lenders and investors more
confidence in these loans.

As a result, conforming loans are available with ultra-low mortgage rates and just 3% down payment.

Check today’s conforming mortgage rates (Jan 17th, 2021)

What if my
loan is over the conforming limit?

Remember
that the conforming loan limit applies to the loan amount, not the home price.

For
instance, say a buyer is purchasing a 1-unit home in Boulder, Colorado where
the limit is $654,350. The home price is $1 million, and the buyer is
putting $450,000 down.

This
buyer is eligible for a conforming loan. The final loan amount is
$550,000 — well within limits for the area.

Still,
many applicants will need financing above their local loan limit. For
them, a number of solutions exist.

Jumbo loans

The
simplest method is to use a jumbo loan. Jumbo mortgages describe any home loan
above local conforming limits.

Using
the example above, let’s say the Boulder, CO home buyer puts down $200,000 on a
$1 million home. In this case, their loan amount would be $800,000 — far above
the local conforming loan limit of $654,350. This buyer would need to finance
their home purchase with a jumbo loan.

You might think jumbo mortgages would have higher interest rates, but that’s not always the case.

Jumbo loan rates are often near or even below conventional mortgage rates.

The
catch? It’s harder to qualify for jumbo financing. You’ll likely need a credit
score above 700 and a down payment of at least 10-20%.

If
you put down less than 20% on a jumbo home purchase, you’ll also have to pay
for private mortgage insurance (PMI). This would increase your monthly payments
and overall loan cost.

The
next method helps you avoid PMI when buying above conforming loan limits.

Verify your jumbo loan eligibility (Jan 17th, 2021)

Piggyback financing for high-priced homes

Perhaps the most cost-effective method is to choose a piggyback loan. The piggyback or “80/10/10” loan is a type of financing in which a first and second mortgage are opened at the same time.

Typically, this structure is used to avoid private mortgage insurance.

A buyer can get an 80 percent first mortgage, 10 percent second mortgage (typically a home equity line of credit), and put 10 percent down.

However,
these loans are also available for those putting 20 percent down or more. Here’s how
it would work.

  • Home price: $700,000
  • Down payment: $140,000 (20%)
  • Financing needed: $560,000
  • Local conforming limit: $548,250

The
buyer could structure his or her loan as follows.

  • Down payment: $140,000
  • 1st mortgage: $548,000
  • 2nd mortgage: $12,000

The
home is purchased with a conforming loan and a small second mortgage. The first
mortgage may come with better terms than a jumbo loan, and the second mortgage
offers a great rate, too.

Verify your piggyback loan eligibility (Jan 17th, 2021)

What’s the jumbo loan limit for 2021?

Technically there’s no jumbo loan limit for 2021.

Since jumbo mortgages are above the conforming loan limit,
they’re considered “non-conforming” and are not eligible for lenders to assign
to Fannie Mae or Freddie Mac upon closing.

That means the lenders offering jumbo loans are free to set
their own criteria, including loan limits.

For example, one lender might set its jumbo loan limit at $2
million, while another might set no limit at all and be willing to finance
homes worth tens of millions.

But the amount you can borrow via a jumbo or
non-conforming loan is limited by your finances.

You need enough income to make the monthly mortgage payments on your new home. And your debt-to-income ratio (including your future mortgage payment) can’t exceed the lender’s maximum.

You can use a mortgagecalculator to estimate the maximum home price you can likely afford. Or contact a mortgage lender to get a more accurate number.

What if I’m
getting an FHA loan?

FHA loans come with their own loan limits. Standard FHA limits for 2021 are as listed below.

  • 1-unit homes: $356,362
  • 2-unit homes: $456,275
  • 3-unit homes: $551,500
  • 4-unit homes: $685,400

You
might notice that FHA’s limits are considerably lower than conforming limits.
That’s by design.

The FHA program, backed by the Federal Housing Administration, is meant for home buyers with moderate incomes and credit scores.

But
the FHA also suits home buyers in expensive counties. Single-family FHA loan limits reach $822,375
in high-cost areas within the continental U.S. and a
surprising $1,233,550 for a 1-unit home in Alaska, Hawaii, Guam, or the Virgin Islands.

What are
today’s mortgage rates for these loan limits?

Mortgage
rates for conforming loans are stellar, which is why so many buyers consider a
conforming loan before using jumbo financing.

Get
a rate quote for your standard or extended-limit conforming loan. Compare to
jumbo rates and piggyback mortgage rates to make sure you’re getting the best
value.

Verify your new rate (Jan 17th, 2021)

Source: themortgagereports.com