Home mortgage interest rates have slipped even further, making it possible for borrowers to obtain loans on 30 years fixed rate loans to $417,000 at Note Rates of 4.625% with just a staggeringly low Annual Percentage Rates of 4.778% for a loan amount of $417,000 with a 1% origination fee and the borrower paying normal loan costs.  That was the rate posted by several lenders as of this morning for the standard FNMA 30 Year Fixed Rate Program and that hasn’t been seen for over 40 years!  Rates for the government-insured FHA Mortgage are not identical and there is mortgage insurance on the government program, but those rates are also extremely low and also available with Note Rates below 5%.

That means that borrowers get more borrowing power than at any time in the recent past.  For example, the Principal and Interest payment on a $417,000 loan amount at 4.625% for 30 years is just $2,143.96 per month.  For a loan amount of $300,000, it would be $1,542.42 and for a loan amount of $200,000 just $1,028.28 per month!  For borrowers looking to lower their current monthly payments or for those borrowers thinking about buying a new home of their own, these payments are more affordable than at any time in the recent past. 

If you combine the lower property values with the low interest rates, purchasers can buy more house now with fixed rate financing.  No gimmicks like a low start rate that jumps up after a year to a rate/payment that the borrower cannot afford or begins to accrue negative amortization if they do not pay the full payment, but a fully amortizing loan which pays down the balance every month.  This opportunity allows borrowers to lower their monthly payments or to retire adjustable rate mortgages for low interest fixed rates.

Government loan programs such as the FHA-Insured mortgage or the VA-Guaranteed loan both offer streamline refinance loans which allow borrowers to refinance their loans with a minimum amount of documentation (can even be done without a current appraisal) and no income qualification.  Many times borrowers can close these loans with no money out of pocket and skip a payment or two giving them extra money in the bank (especially when they get the impound refund from their previous lender) on top of the savings they receive monthly on their new lower payment amount.

The FNMA conventional loans do not have a streamline feature, but a borrower going from a 6.5% Note Rate to a 4.625% note rate on that same $417,000 loan amount, will receive a savings of $491.76 per month on their Principal and Interest payment.  6.5% interest rates were available not that long ago and many borrowers were forced to take even higher rates due to credit or other issues at the time they originally received their mortgage loans.  If they have been able to clear those credit issues now and can retire even higher interest rate loans, then they can save even more each month.

No one knows how long this current interest rate environment will last.  There is no way to know what housing prices will do in the future.  Some economists say that housing prices have to come down yet a little more while others seem to think that we are near or at the bottom.  Whatever the case may be, now is an extremely opportune time to obtain a very low interest rate which makes purchasing or refinancing an attractive option for those who have been sitting on the side waiting for “the right time”.  When prices do start rising again or rates begin to creep up, the affordability for purchases may not be as good again in the near future as it is right now.