Average Closing Costs for a Home Mortgage

What are some average closing costs for your home mortgage?

If you are in the market for a new mortgage there are some average closing costs that you should be aware of.

Keep in mind these are averages, but it will give you a good base so you know you are not being ripped off by the man.

  • Origination and Points: Average about 1% – 3%.
  • 3rd Party Fees: Total can be about $1,800 up to $3,500.  This is a wide range, so be sure to compare 3rd party fees from loan officer to loan officer. 3rd Party fees include: (some fees only apply to purchases and some only to refinancing.  These are the normal fees you may see on your Good Faith Estimate (GFE), but this list is not complete. Be sure to review the fees on your loan carefully.)
    • Appraisal – $400
    • Loan application fees – $300
    • Credit Report – $25
    • Inspections – $150 – $300
    • Recording fees – $45 – $90
    • Escrow Fees – $400 – $3,000
    • Fees Will Be Updated As Needed.

Remember there are certain fees that are negotiable like the origination and points.  Typically Loan Officers will transfer points on the front to points on the back.  Points on the back of the loan are called YSP (yield spread premium).  What is YSP?

Educating yourself before choosing a mortgage can save you big money once you are ready to sign the papers.

Will Mortgage Rates Go Back Up in 2011?

As you well know mortgage rates have been extremely low for quite some time now.

Our nation has not seen mortgage rates hit these lows for decades.  And even when we think they could not get any lower mortgage rates continue to hit record lows.

This has caused as many people that can do so to refinance their home in order to save money.  The problem therein lies in the fact that these rates are a product of the week economy, an economy which was set into a landslide when the housing bubble burst into pieces within the last 2 years.

Unfortunately many people that really need to refinance their homes cannot because they do not have enough equity to meet the LTV (loan to value) requirements for a mortgage. (Learn More About Mortgages Here)

Quite a pickle… right?  Right.

On the other side of the mortgage coin people that are looking to purchase a home are in a screaming good position.  Housing prices are low, mortgage rates are through the floor and there plenty of houses on the market.

In these economically difficult times low mortgage rates have been a life line for many home buyers and home owners.

But are the low mortgage rates going to end?

That is an excellent question.  Is it going to be by the end of 2010?  Will mortgage rates stay low in 2011?

Here are 2 Large Factors to watch for to help determine if and/or when mortgage rates may head back up the mountain.

The Mid Term Elections:

Typically big election years can affect mortgage rates.  Well, maybe not directly but elections definitely effect consumer confidence, which effects the economy which will eventually trickle down to mortgage rates.   Rates do not tend to change much before the election, but we could see some changes or movement in mortgage rates if there is a switch in power.  A big change in Washington tends to either build consumer confidence or shake consumer confidence.  Both of which will have an effect on the economy and ultimately on Mortgage Rates.

How does the Economy Affect Rates?

Short term loans like credit cards and auto loans are directly affected by the Feds lower or raising of the prime interest rate. The Federal Reserve will move short term rates up or down in an effort to maintain the stability of the nation’s financial system. Economic ups and downs often spur the Feds to take action considering the financial system and mortgage rates.  These changes only directly affect short term loans, but indirectly effect long term loans like mortgages.  The Prime rate is an indicator of the strength of the economy.  Although not always the case, mortgage rates do often follow the prime rate either up or down.

Therefore if there is an economic up term in 2011 we may see the prime rate increase, which will be a sign of a bettering economy and mortgage rates may be soon to follow.

Then again we may not see a strengthening economy for some time, so these rates may be a little while longer.

Long Term Rate Locks? & Sept 24th Mortgage Update

The Freddie Mac Primary Mortgage Market Survey is showing average mortgage rates are unchanged from last week.

This weeks rates are…

  • 30-Yr Fixed – 4.37 %
  • 15-Yr Fixed – 3.82 %
  • 5/1-Yr ARM – 3.54 %

There was one slight decrease for the 5/1 ARM.  Last week it sat at 3.55%

Old Article? See todays Mortgage Rates.

If you are still on the fence about locking today or waiting just a little longer consider this.

Mortgage Rates have not been this low for over 50 years.  Plus mortgage rates are subject to change any minute.  They could shoot drastically up at any point leaving you in the dust.

If I was in a place to refinance or if I was purchasing a home I’d definitely be calling my broker and locking today.

Is it worth Locking Long Term for Purchases?

Rates are so low right now many people are locking in rates for 90, 120 and even 150 days in the event they find their home in the next few months.  Depending on how seriously you are currently looking for a house this may be an option suitable for you.

Be careful to not lock too far out because the length of your lock will affect your rate.  The longer the lock period the higher the rate will be.

The benefit of doing this is because of the volatility of the market right now.  Yes, we could see rates drop more, but it is just as likely, if not more likely, to see them increase over the next few months.

Locking in your rate now would insure you get that rate for the term you indicate in your loan.

Call your Loan Officer today to get some of the options for long term locking.  And checkout our mortgage help article if you are thinking about purchasing or refinancing.

Mortgage Rates are Up and Down – September 16th

For the second straight week the 30 year mortgage rates have moved up, but the 15 year and 5 year ARM have decreased slightly.

Before we get into the speculation lets see the rates for this week.

  • 30-Yr Fixed – 4.37 %
  • 15-Yr Fixed – 3.82 %
  • 5/1-Yr ARM – 3.55 %

And compare those to last week…

  • 30-Yr Fixed – 4.35 %
  • 15-Yr Fixed – 3.83 %
  • 5/1-Yr ARM – 3.56 %

It is pretty hard to draw any conclusions based on these rates.  At the very basic assessment rates are still incredibly low and if you are able to refinance or are purchasing a home you should count yourself lucky.

Is it worth waiting to see if they get lower?

No.  Could they get lower? Yes, but at this point rates have not been this low for half a century.  It is not worth the risk to hold out for lower rates.  If there is even a sniff of a strengthening housing market or economy you can expect to see these rates jump back up.

These rates are based on the Freddie Mac Primary Mortgage Market Survey.  Banks all over the nation are polled for there current rates and these are the averages.

The 30 year fixed is base off of 0.7% points, while the 15 year and the 5/1 ARM are based off of 0.6% points.

Old Article? See todays mortgage rates.

Big Change is Coming for FHA Loans

FHA LoanThe Federal Housing Administration (FHA) is making some big changes to their mortgage insurance structure.

Starting October 4th 2010 the upfront mortgage insurance fee will be lowered from 2.25% down to 1%.

Sounds great doesn’t it?  Well hold on just a second…

FHA mortgage insurance is making up their losses by nearly doubling the monthly mortgage insurance that is mandatory on FHA loans.  Currently monthly mortgage insurance on a FHA loan is .55%, as of October 4th this will be .90% or even higher.

How does this affect you?

Typically borrowers apply for an FHA loan because the down payment requirement is only 3.5%, which is much lower than a conventional loan.  If you qualify for an FHA loan today your up front mortgage insurance may be $2,000 and your Monthly Mortgage insurance may be $90 (hypothetically).

If you get a FHA loan after October 4th your upfront mortgage insurance would be just under $1000, but your monthly mortgage insurance would nearly double at over $160 a month.  In this hypothetical scenario you would save $1,100 up front and spend $70 more per month.  It would only take 16 months before you spent more money monthly than you would have paying the mortgage insurance up front. After 3, 5, or even 10 years you are going to spend thousands of dollars more on the MI.

Now in a real loan the numbers may look different, but this scenario is meant to show you how the Federal Housing Administrations changes are going to affect you if you apply for a FHA loan after October 4th.

To Sum it all up…

In summary the new changes are going to end up costing homeowners who stay in their house longer than just few years thousands of dollars more.

If you stay in your home just a short time, like under 2 years, this new deal may end up saving you money.  Have your Loan Officer crunch the numbers so you know what type of upfront costs and monthly costs will be associated with your FHA loan.

And if you can qualify and close your FHA loan before October 4th 2010 that may save you thousands of dollars over the life of your mortgage insurance.

Should I do a FHA Loan for My Mortgage?

An FHA Loan could be the answer you are looking for.

FHA loans are insured by the Federal Housing Administration (FHA).  There are some certain rules and benefits that come with FHA loans.

Here are the details you will need to know about an FHA loan.

Benefits of an FHA Loan:

  • Low Down Payment – FHA only requires 3.5% down payment on purchases.  Compare this with 5% on conventional loans. (5% if you are lucky, most likely the down payment will be no less than 10%.)
  • Lower Closing Cost Fees – This is one of the rules for the broker. There are certain fees that cannot be charged into an FHA loan which makes your closing costs less expensive.  Now most brokers and banks will try to make this up somewhere else so they do not have to pay those fees.  This is okay because those fees need to be paid, but you can ask them where they are making up the money for the fees that cannot be covered.  It will either be more points on the front or in the YSP (What is YSP?)
  • Lighter Credit Requirements – This means your credit score can be lower and still qualify for a FHA loan.

Cons of an FHA Loan:

  • Up Front Mortgage Insurance – FHA loans charge an upfront mortgage insurance fee of 1.5%.  You will have to pay this on the front of your loan making it more expensive than a conforming loan.  The fees cost less but mortgage insurance ads more.
  • PMI – Most people that opt for an FHA loan do so because of the 3.5% down payment.  This means you will have to pay a monthly mortgage insurance.  For mortgages with terms 15 years and less and with Loan to Value ratios 90 percent and greater, annual premiums will be canceled when the Loan to Value ratio reaches 78 percent regardless of the amount of time the mortgagor has paid the premiums.

If you are in the market for a mortgage be sure to ask your broker about an FHA loan. An FHA Loan could be the answer you are looking for.

Mortgage Rates Slightly on the Rise – September 9

Rates Moving UpMortgage rates back bounce to where they were on August 26th.

It is not to often these days that we see rates on the rise.  Although some experts think that is about to change.

Todays rates are slightly higher than they were last week.

  • 30-Yr Fixed – 4.35 %
  • 15-Yr Fixed – 3.83 %
  • 5/1-Yr ARM – 3.56 %

Last week rates looked like this.

  • 30-Yr Fixed – 4.32 %
  • 15-Yr Fixed – 3.83 %
  • 5/1-Yr ARM – 3.54 %

These rates are based on the Freddie Mac Primary Mortgage Market Survey.  Banks all over the nation are polled for there current rates and these are the averages.

The 30 year fixed is base off of 0.7% points, while the 15 year and the 5/1 ARM are based off of 0.6% points.

Old Article? See todays mortgage rates.

Should you lock your rate in now?

Rates are at the lowest they have been in many decades.  It is foolish to not lock in now while they are this low.  You may make the estimation that rates will continue to fall in a week economy, but to me the risk/reward factor is not large enough to float your rate.

Once lenders catch a glimpse of a strengthening economy those rates are likely to shoot up by a half percent or more.

Back in January and February of 2008 rates were dipping close to 5%.  There was a frenzy of refinances and loan locking.  Many people decide to try and float their rate to get under 5%.  Within an hours time lenders put a hold on rates so no one could lock.  When that hold was lifted rates were sitting back at 5.5% and continually rose after that.

Many people missed out on 5% fixed rates, including me. Yes, I decided to try and hold out for a lower rate.  That decision as cost me more than 60 dollars a month for more than a year and half now.  To date I have blown $1080.  If I stay in this mortgage for just 5 years that will be a  $3600 dollar mistake, and if I stay in the house for the entire term of the mortgage it will have been a $21,600 dollar mistake.

You know, I have never actually done the math on that decision and it hurts.

Wells Fargo Mortgage Rate Review

Wells FargoWells Fargo is one of the nations largest banks.  Sometimes large banks are able to offer very competitive mortgage rates for their customers.

In this case Wells Fargo is showing some good average mortgage rates.  Most of the rates are falling right in line with national average.

Remember rates may change depending on where you live, but this is a good start.

These rates are based on 1 point (1% of the loan amount) being paid for origination.

Term Rate APR
30-Year Fixed 4.375% 4.559%
30-Year Fixed FHA 4.375% 5.100%
15-Year Fixed 3.750% 4.069%
5-Year ARM 2.875% 3.209%
5-Year ARM FHA 3.250% 3.074%

If you want to check out more info at Wells Fargo or read the fine print click here.

Check out the National Mortgage Rate Averages Here.

Wells Fargo has been around for well over a century. Over 150 years ago, Henry Wells and William Fargo founded a company that has become a legendary part of America. This heritage is still very much a part of Wells Fargo’s identity today.

Free Falling – Mortgage Rates – August 26th

According to the Primary Mortgage Market Survey by Freddie Mac mortgage rates have continued to free fall.

Currently Rates are:

  • 30 year fixed – Averaged 4.36% – Last week it was at an average of 4.42%. A year ago this week the 30 year rate was at 5.14%.
  • 15 year fixed – Averaged 3.86% – Last week it was at an average of3.90%. A year ago this week the 15 year fixed 4.58%.
  • 5 year ARM (Adjustable Rate Mortgage) – Averaged 3.56% which was the same as last week. A year ago this week the 5-year ARM 4.67%.

The 30 year fixed and 5 year arm are based on an average of 0.7 points, and the 15 year fixed is based on .06 points.  Additionally the rates posted are based on an average from across the nation and may not necessary reflect the mortgage rate you will receive if you refinance today.

This is a wonderful time for those that have a mortgage to refinance to take advantage of the lowest rates this country has seen in decades. Hundreds and thousands of dollars are being saved by those able to refinance their existing mortgage to a lower rate.  The trouble for most homeowners is the lack of equity in their home caused by the current recession which makes them unable to refinance.

How will this effect the ecomony?

As for how this will effect the economy the opinions are being reflected as both positive and negative. Many believe this is just more troubling news for an ever weakening economy. Signs that things are getting worse and we are not on the road to recovery quite yet.

Other experts feel these low rates could put more money in consumers pockets due to the savings from refinancing.  This higher cash flow could help spur the economy on for the better.

Time will tell.  Let us know your thoughts in the comments below.

As Rates Drop Refinances Rise – August 19th

As Mortgage Rates continue on with record lows refinance activity is increasing dramatically.

According to the Mortgage Bankers Association 81% of new mortgage applications have been for refinance.

This nation has not seen rates like this in over 50 years, and homeowners everywhere are refinancing their mortgage to get locked into these record low mortgage rates.

Will rates keep going down? or should you lock now?

According to the experts this is no time to sit on the fence.  If you are in a position to refinance your home now is the time to get locked in.  Think of it this way.  Not since the 50’s has anyone had a mortgage rate as low as yours is going to be.  So I’d guess that locking now is the best idea.

According to the Mortgage Bankers Association the national average for mortgage rates are as follows…

  • 30-Year Fixed Rate 4.57%
  • 15-Year Fixed Rate 3.95%

If you want to see today’s rates then check out the national mortgage rates.

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