Mortgage Updates for 2011 Leading financial experts suggest that borrowers should apply for a new mortgage loan, or refinance their home loan when the time is right for their individual needs, rather than attempt to time the market. While risk takers may be enthusiastic about waiting until the last minute to lock in a low mortgage interest rate, most homeowners and homebuyers prefer to observe general mortgage market trends and focus more intently on their own finances. Predicting a specific mortgage rate for a particular time is pretty nearly impossible, but real estate market observers have identified a few trends that they anticipate will impact the mortgage market in 2011:
1. Mortgage rates will slowly rise throughout the year.
The Mortgage Bankers Association (MBA) anticipates that rates will rise slightly in 2011, hovering around 5% and increasing to about 6% in 2012. While any increase in mortgage rates is unwelcome to homeowners who want to refinance or to buyers, a 5% mortgage rate is still historically in the low range of interest rates.
2. Mortgage applications for a home purchase will become a greater part of the market.
The MBA predicts that stabilizing home prices and modest increases in home sales will increase the number of applications for a mortgage for a home purchase.
3. Jumbo loan mortgages will be more attractive. In 2009 and earlier in 2010, mortgage rates for jumbo loans (loans over $417,000 in most housing markets and above $729,750 in high-cost housing markets) were far higher than mortgage rates for conforming loans. The higher rates prevented homeowners from refinancing and kept some purchasers out of the market for more expensive homes. In the Q4 of 2010, mortgage rates on jumbo loans decreased, which will likely spur refinancing applications and purchase applications for the high-end housing market.
FYI: Bank of Commerce Mortgage offers 30 year fixed rate loans with:
- 20% down (80% loan to value) for loan amounts to $1 million
- 25% down (75% loan to value) for loan amounts to $1.5 million
- 30% down (70% loan to value) for loan amounts to $2 million.
4. The down payment requirements for conventional financing will be loosening up in the near future. FHA needs some breathing room and we anticipate PMI companies will allow a 97% loan to value (3% down payment) again for well-qualified buyers.
5. Requirements on gifts for down payments are changing. On loan amounts above $417,000 buyers will now be required to contribute a minimum of 5%, the remaining down payment can come from a gift. If the loan amount is under $417,000 the old rules still apply allowing a buyer to receive a gift for 100% of the down payment and contribute nothing with a minimum 20% down payment.
The Bottom Line While these general mortgage trends may impact the real estate market overall, each homeowner or buyer considering applying for a mortgage should meet with a lender to determine the cost and availability of a loan that meets his or her needs.