By Kerby Claney
Vice President – Stifel Bank & Trust
I’ve been getting calls all day from people hearing the rumor about 4.5% mortgage interest rates.
Unfortunately, a rumor is all it is.
There are some lobbyist groups pushing to try to get the Treasury Department to lower interest rates to 4.5% for home purchases. The reality is that the Treasury has not made any comments to suggest that they have any plans to lower interest rates this low.
The reason that interest rates dropped last week so dramatically is because the Treasury has been investing in mortgage backed securities. Since the Treasury plans to continue on this path, we may see interest rates drop further.
In the meantime, interest rates are currently lower than they have been in quite some time and offer a great opportunity for many homeowners to refinance to get out of an ARM mortgage or to lower their fixed rate.
Keep in mind that published interest rates are for the best of the best. Depending on a borrower’s loan to value (LTV) and credit score, rates may be adjusted upward from .25% to .50%, or even higher for people with credit issues.
For example, today’s 30 year fixed rate for a person with a 740 credit score and a LTV of 75% would be 5.25%. Another borrower with a 690 credit score and an 80% LTV would only be offered a 5.75% rate.
What is Loan to Value (LTV)?
LTV is how much value is covered by the mortgage. If you have a LTV of 75% , it means that the mortgage is equal to 75% of the value of the property. The remaining 25% of value is in the down payment or second mortgage (new purchases) or equity (refinances).
With credit scores having such a major impact on the interest rate a borrower will receive, anyone looking at making a purchase or refinance in the next 6 months should request their annual free credit report from the 3 credit bureaus as soon as possible. Use the next few months to make any corrections needed to your credit reports and work on getting the credit score as high as possible.
If you want to know if it be a good move for you to refinance now, contact me and we can discuss your specific situation. Refinancing now doesn’t make sense for everyone, but for others it could save them hundreds of dollars and future ARM resets.
Today’s rates for those without LTV or credit rate adjustments are below:
**** Some mortgage products are not reported when they are at rates that would make them poor choices for almost all borrowers.
This information is not intended to extend consumer credit as defined Section 226.2 of Regulation Z. Interest rates, program terms and conditions are subject to change without notice.