While most mortgage interest rates stayed steady over the weekend, interest rates dropped for 30-Year Fixed-Rate FHA loans and for Five-Year Adjustable Rate Mortgages (ARMs), according to Wells Fargo Home Mortgage.
While conforming 30-Year Fixed-Rate mortgage loans stayed the same at 4.875% interest with an APR of 5.065%, the 30-Year Fixed-Rate FHA loans dropped slightly to 5.000% interest with an APR of 5.717%. Wells Fargo Home Mortgage is also offering Five-Year ARMs at 3.750% interest rates or 3.519% APR. These mortgage rates are slightly lower than those offered last week. Five-Year FHA ARMs also dropped slightly to 3.750% interest, with an APR of 3.267%.
Each of these loans requires one point paid at settlement.
FHA-insured loans remain popular with borrowers today because of the low 3.5% down payment and easier credit qualifications. Home purchasers with more money for a down payment may prefer a conventional loan, though, because FHA loans require an upfront mortgage insurance premium payment and a monthly mortgage insurance payment. First-time buyers tend to prefer FHA loans because of the difficulty of accumulating the cash for a down payment. For example, for a home purchase of $200,000, a conventional loan would require $40,000 as a down payment. An FHA loan would require just $7,000 for the down payment.
Another benefit of FHA loans is that sellers are allowed to give homebuyers as much as 6% of the purchase price towards closing costs or other contributions to the home sale. This can also make a purchase easier for cash-strapped first-time buyers.
The FHA has announced tightened requirements which will be in effect beginning in the spring and summer of 2010. These new rules will require that borrowers with lower credit scores make a down payment of at least 10%. In addition, seller contributions will be reduced to 3%, which is similar to conventional loan requirements.
Written by Michele Lerner
HULIQ.com
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