Homes Closed With Lowest Average Mortgage Rates in 12 Months
April saw the lowest average mortgage rates in one year.
Mortgage software leader Ellie Mae reported that the average 30-year note rate was 4.10% this past month. The 30-year rate has been falling for the past four months, and the last time that the rate was this low was in May of 2015.
Mortgage rates have been falling consistently throughout 2016. Low rates have made housing more affordable today than it would have been at the beginning of the year.
As long as rates continue to fall or stay at low levels, home buyers should be able to afford a home more easily than they could have just a few months ago.
The more mortgage rates fall, the more affordable home buying becomes. Those looking to purchase a house will want to keep track of the best rates currently available.
FHA Loans Have Low Reported Rate Average
Ellie Mae compiles a monthly origination report that analyzes housing data from the month before. Among the statistics they report, one of them is an average rate for all closed loans that pass through their system. The report averages the data for a number of statistics, one of which is the 30-year note rate.
It is important to keep in mind that Ellie Mae’s report states the average across the nation for the month of April. Rates have already been lower in the month of May than they were in April, so rates today could easily be lower than those reported by Ellie Mae.
Also, Ellie Mae’s report averages the mortgage rate for a 30-year loan across all mortgage types. This is important to note because some mortgage types consistently have lower rates than others.
According to Ellie Mae, the average rate on a 30-year mortgage for an FHA loan was 4.05%, five basis points (0.05%) lower than the national average rate.
FHA loans are known for being an accessible loan type that requires low downpayments. But FHA loans also tend to get lower rates than comparable conventional loans. In many cases, home buyers can benefit more from an FHA loan than other loan types.
FHA Loans Becoming Easier To Qualify For
The average credit score of approved FHA loans also dropped in the month of April.
Home buyers who took out an FHA loan in April had an average credit score of 685, the lowest average for any loan type. This was also the lowest average accepted credit score for FHA loans since the beginning of 2015.
A credit score of just 580 is required to qualify for an FHA loan. However, this doesn’t mean that every home buyer who gets an FHA loan has a credit score of 580. Because Ellie Mae reports an average rate, home buyers with credit scores below the average could still qualify for an FHA loan.
Another interesting point in the report was that the average downpayment on an FHA loan was just four percent. Those applying for an FHA loan can put as little as 3.5% down, but many buyers will opt to make a larger downpayment.
There are pros and cons to making a large or small downpayment. Those looking to make a smaller downpayment would likely find that an FHA loan works best for them. Because FHA loans have low required downpayments and the lowest required credit scores they work well for a number of home shoppers.
Housing Market Remaining Strong
The housing market has been strong in 2016 and there are no signs of it slowing down anytime soon.
Homes loans are getting easier to get approved for across the board, and many home buyers may find that getting a mortgage today is easier than getting a mortgage at the beginning of the year.
Also, low mortgage rates have been fueling the economy. Current rates are near record low levels, and the housing market is in its busiest season of the year. All signs point to the housing market as one of the strongest sectors of the economy.
For home buyers, this means that they can feel secure in their decision to purchase a home. Low rates will keep their monthly payments low and manageable for the life of the loan.
Those looking to purchase a home should be comfortable knowing that they’re getting some of the lowest rates possible.