Mortgage Rates Nearing 2-Year Bests
Current mortgage rates have made another move lower.
Based on mortgage-backed securities (MBS) and daily market pricing, the conventional 30-year fixed rate mortgage rate is now hovering under 3.5% nationwide for buyers paying points on their home loans.
Meanwhile, rates for FHA loans and VA are tracking even lower.
According to Ellie Mae, FHA mortgage rates currently average 14 basis points (0.14%) lower than a comparable conventional loan; and VA mortgage rates currently average 28 basis points (0.28%) less.
Low mortgage rates can be enticing to today’s renters and home buyers — especially with banks making it simpler to get approved for today’s mortgages. However, not every buyer thinks they have enough the means to make a downpayment.
Don’t have 20% for a home downpayment? No problem!
As the housing market improves, mortgage lenders have made a multitude of low- and no-downpayment mortgage programs available to U.S. buyers. The programs aren’t just for first-time buyers, either. Repeat home buyers are getting access to the same zero-down products as everyone else.
So, what options do first-time and move-up buyers have today? Plenty.
You Don’t Need 20% Downpayment
To buy a home, you don’t need to make a 20 percent downpayment. Unfortunately, though, the “20% Downpayment Myth” is widely circulated; passed down from parents to children; and college professors to students.
And there’s actually a good reason why people say you need 20% down to buy a home — without such a downpayment, buyers are typically subject to mortgage insurance payments which can add to monthly housing costs.
To avoid mortgage insurance payments, then, buyers have been conditioned to put 20% down, even though it’s not required or necessary.
Remember: The “20% down” myth is unique to conventional loans. FHA loans, VA loans, USDA loans and jumbo loans charge mortgage insurance differently from Fannie Mae and Freddie Mac.
On a conventional mortgage, in some circumstances, mortgage insurance can be removed in as few as 12 months from closing. This is not a long time. However, for other loan types, mortgage insurance can last as long as 30 years.
More important than making a 20% downpayment, then, is choosing the most appropriate loan for your downpayment needs.
There are three government-backed mortgage programs which allow for downpayments of less than 5 percent; and each is a viable option for today’s U.S. buyers.