LendingTree Monthly Mortgage Review: FHA’s Changing Guidelines May Increase Mortgage Rates

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Rates in Texas, Washington and New York Lowest in the Country

According to the LendingTree Monthly Mortgage Review, average mortgage rates inched up in March, while more borrowers than ever took advantage of low Federal Housing Administration (FHA) loan rates. Even with the slightly higher rates experienced by the market in March, the average FHA 30-year fixed rate was just 3.85 percent, almost 50 basis points lower than the average rate for a 30-year fixed rate mortgage in the same time period.

However, because the FHA is currently adjusting its loan program guidelines and insurance premium structure, the cost of a loan for future FHA borrowers will likely increase. The burden is on potential borrowers to thoroughly vet their options to ensure they are taking advantage of the currently low rates before they rise.

Changing Guidelines Varies Rates for Consumers

The FHA recently announced that it will disqualify potential borrowers with credit disputes greater than $1,000. It also released changes to its insurance premium structure for homebuyers. Effective today, April 9, up-front insurance premiums will increase to 1.7 percent of the loan amount, up from 1 percent. Additionally, annual insurance costs for purchase loans, paid monthly, will rise .1 percentage points.  The increase in annual insurance costs is even greater for loans above $625,500, making a .35 point jump.

In contrast, FHA refinances will see a dip in costs. Beginning in June, the FHA will lower its upfront and annual premiums for existing FHA borrowers, saving the average FHA borrower approximately $3,000 per year.

Doug Lebda, chairman and CEO of LendingTree, says the key is for consumers to thoroughly research their own financial situation and explore all potential options before settling on a plan.

“Borrowers who are in the market for either a purchase mortgage or refinance need to be proactive with their lenders and explore all available options,” says Lebda. “LendingTree has seen an approximate 12 percent increase in FHA loans year-over-year, as the program is attractive to qualified borrowers with lower down payments, particularly among first-time homebuyers. Taking these latest changes into consideration, choosing between conventional and FHA financing should be carefully considered.  Paying additional private mortgage insurance (PMI) on a conventional loan with a low down payment may actually prove to be a better financial decision because of the upfront and annual premium increase.  Borrowers should work with their lenders to analyze options and the associated costs to determine which loan may best fit their needs.”

Tracking the National Spread

LendingTree tracked the lowest, average and highest rates offered from more than 200 mortgage lenders on the LendingTree network for each loan program in March. In March, 2012, average mortgage rates offered by LendingTree network lenders were 4.34 percent (4.56% APR) for 30-year fixed mortgages, 3.53 percent (3.89% APR) for 15-year fixed mortgages and 3.07 percent (3.36% APR) for 5/1 adjustable rate mortgages (ARM).

Loan Program

Min. Rate Offered

Avg. Rate Offered

Max. Rate Offered

30-Year Fixed

3.500%

4.34%

5.900%

15-Year Fixed

2.875%

3.53%

5.375%

5/1 (ARM)

2.500%

3.07%

5.125%

The top ten metro areas with the lowest average rates in the Country according to LendingTree data for March are:

Top Ten Metro Areas with Lowest Average Rate

Metro Area

30-yr Fixed Rate

Austin, TX

3.97%

San Antonio, TX

4.00%

Seattle, WA

4.05%

Staten Island, NY

4.08%

Washington, DC

4.08%

Los Angeles, CA

4.11%

Denver, CO

4.13%

San Diego, CA

4.14%

Portland, OR

4.15%

Minneapolis, MN

4.16%

The LendingTree Monthly Mortgage Snapshot is published the first week of each month and tracks the lowest and average mortgage rates offered by lenders on the LendingTree network, offers an industry overview and provides an outlook for the month ahead. Home loan rates above are reflective of actual rates offered to borrowers by lenders on the LendingTree network. Lowest rates shown reflect the payment of one discount point. Rates will vary based on the borrower’s loan details and credit profile. Visit www.lendingtree.com to learn more.

 

 

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