Low Mortgage Rates Are Favorable for Housing Market Except When Jobs Are Down

There was a lot of enthusiasm during the first quarter of the year when economic reports were showing some positive news which was leading to optimism for a real economic recovery. Unfortunately, this was short lived as the second quarter is not fairing as well. The current low mortgage rates are very favorable for the housing market, except when jobs are down and consumers who are working are concerned about their own employment. Without jobs being created, home purchase numbers will continue to struggle.

Last week's jobs report for May was quite disappointing for everyone. With only 69,000 jobs created and the unemployment rate slightly increasing, optimism is bound to fall. The lack of jobs is hurting the housing market recovery which is, in effect, hurting the overall economy. The housing sector is a very important job creator, especially for construction jobs. For the month of May, 28,000 construction jobs were lost which may be signaling a weak summer home building period which is what happened during the past two years. Although permits are up, most of them represent home improvements. According to Fannie Mae's chief economist Doug Duncan, while there are signs of improving consumer sentiment in housing, this is unsupported by today's data.

For those who are employed and receiving income, the current high affordability of housing is promising. FreeRateUpdate.com's survey of wholesale and direct lenders shows that 30 year fixed mortgage rates are at 3.375% for long term financing and 15 year fixed mortgage rates, which are gaining popularity, are at 2.750%, all available with 0.7 to 1% origination fee for well qualified borrowers. Well qualified means that the borrower must have steady employment and income and enough assets to complete the transaction. In today's tight credit environment, many borrowers who have what it takes to obtain a mortgage are still turned away. Mortgage refinances can be even a bigger problem for borrowers who owe more than the value of the property. For this reason, HARP was expanded to include all loan to values in order to streamline the process and make low mortgage rates available to more homeowners. Still, borrowers continue to have issues refinancing under HARP. However, online inquiries for any type of mortgage, including HARP, are having more success because there are more lenders available in one place giving borrowers a better chance at being assisted specifically for their circumstances. This is significant because there has never been a better time than now for a mortgage refinance.

FHA has always been the choice of mortgage because of the low down payment requirements and low mortgage rates. Unfortunately, FHA raised the upfront and annual mortgage insurance premiums which is making even these mortgages more difficult to obtain. In fact, many of the FHA purchase mortgages have been with higher income borrowers because FHA's loan limit is currently up to $729,750 depending on location. On June 1st, Rep. Karen Bass from California sponsored Bill H.R. 5884: Homeownership Preservation Education Act of 2012 to create a one year pilot program with reduced FHA upfront mortgage insurance premiums for first time home buyers. These borrowers would be required to take and complete a homeownership counseling program. The idea behind this is to reduce default and foreclosure rates by using counseling and to reduce the UFMIP by .25% making a home purchase more affordable for first time home buyers. Too many average income borrowers cannot qualify with the higher premium fees now charged with FHA loans. This bill is promising but has a long way to go before it passes, if at all.

No matter what, consumers need jobs in order to be able to bring back the housing market. On the other hand, with the majority of consumers still employed, credit restrictions and overlays are stopping the progress. Persistence on the consumers part is essential in order to obtain a mortgage. What one lender turns down is another lender's choice loan.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders' rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard 0.7 to 1% point origination fee.