Mortgage rates inched down this week as builders and homebuyers continue to regain confidence in the housing market.
The benchmark 30-year fixed-rate mortgage fell to 3.53 percent from 3.54 percent, according to the Bankrate.com national survey of large lenders. The mortgages in this week's survey had an average total of 0.39 discount and origination points. One year ago, the mortgage index stood at 4.23 percent; four weeks ago, it was 3.61 percent.
The benchmark 15-year fixed-rate mortgage fell to 2.86 percent from 2.87 percent. The benchmark 5/1 adjustable-rate mortgage fell to 2.7 percent from 2.72 percent.
While low mortgage rates alone are not enough to fuel home sales, they make homeownership more affordable -- and that's certainly helping the market, says Derek Egeberg, a branch manager at Academy Mortgage in Yuma, Ariz.
Weekly national mortgage survey
Results of Bankrate.com's Nov. 20, 2012, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
|30-year fixed||15-year fixed||5-year ARM|
|This week's rate:||3.53%||2.86%||2.7%|
|Change from last week:||-0.01||-0.01||-0.02|
|Change from last week:||-$0.92||-$0.79||-$1.74|
"I don't believe the rate is the reason people are buying, but when they start the process and they hear that their mortgage payments can be less than what they are paying for rent, they want to take advantage of that," he says.
More signs of housing improvement
Sales of existing homes rose 2.1 percent to a seasonally adjusted annual rate of 4.79 million in October, according to a report released this week by the National Association of Realtors.
As more buyers jump into the market and the inventory of homes on the market for sale shrinks, homebuilders seem ready to bet on the housing market again.
Construction of new homes increased 3.6 percent in October to a seasonally adjusted annual rate of 894,000, compared to September, the Commerce Department said Tuesday. That's more than a 40 percent jump in homebuilding activity compared to the same period last year.
Who's buying homes
Egeberg says many of his clients are first-time homebuyers seeking FHA loans with 3.5 percent down payments. Despite increases in FHA mortgage fees, in many parts of the country, it still makes more financial sense to own than to rent, he says.
Existing homeowners seeking to buy a new home and buyers of vacation and second homes also have slowly been returning to the market, says David Kuiper, a mortgage planner at First Place Bank in Holland, Mich.
"The convergence of where homes are priced today combined with the low interest rate environment makes this a great time to buy," he says.
Mortgages not for everyone
But just because you want a home and think you can afford one, it doesn't mean you can get a mortgage to pay for it.
Tight credit standards remain a problem for many qualified buyers, and that's an obstacle for the housing recovery, says Federal Reserve Chairman Ben Bernanke.
"While historically low mortgage interest rates and the drop in home prices have made housing exceptionally affordable, a number of factors continue to prevent the sort of powerful housing recovery that has typically occurred in the past," he said Tuesday while speaking at an event in New York.
"Notably, lenders have maintained tight terms and conditions on mortgage loans, even for potential borrowers with relatively good credit," he said.
Don't take 'no' as an answer
Potential borrowers shouldn't give up easily if they have been turned down, mortgage professionals say.
"Buyers who are currently held back by tight mortgage credit standards should work to improve their credit scores so they'll be able to qualify for a mortgage while conditions are still favorable," says Gary Thomas, NAR president and broker-owner of Evergreen Realty in Villa Park, Calif.
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