With the exception of a slight drop in the currently little-used one-year Treasury ARM, the average rate for most common loan types continued to inch up during the week ending April 7 — a trend that one lending executive believes could give a boost to "assumable" FHA loans.
Frank Nothaft, vice president and chief economist at Freddie Mac, attributed the slight gain in most rates to recent employment statistics that were considered relatively optimistic.
The average rate for a 30-year FRM now stands at roughly 4.87% with 0.7 points up front. Last week FRMs were offered at slightly less: 4.86%. A year ago the rate was a bit higher at 5.21%.
For 15-year FRMs, the average rate during the week ending April 7 was 4.1% with 0.7 points, compared to 4.09% the previous week. A year ago the rate was 4.52%.
The average five-year Treasury hybrid ARM rate during the latest week was 3.72% with an average of 0.7 of a point, up from 3.7% the previous week but down from 4.25% a year ago.
In contrast, the average rate for a one-year Treasury-indexed adjustable-rate mortgage during the most recent week slid to 3.22% with an average of 0.7 of a point from 3.26% the previous week and also was down from 4.14% a year ago.
The upward drift in most rates is making FHA mortgages more attractive because under certain circumstances a homebuyer can assume a government mortgage, unlike most other loan types, according to preliminary report written by Total Mortgage Services president John Walsh. Walsh notes that even if rates rise, borrowers who buy a property from a seller with an existing FHA loan (from a time when rates were lower), probably can assume the seller's note, and save money.
However, if the value of the home being purchased has appreciated since the original mortgage was taken out, the buyer may need to bring cash to the closing table in order to make up the difference. Additionally, the savings from assuming the mortgage must outweigh the cost of the upfront mortgage insurance charged by the FHA.
The buyer must intend to live in the house as their primary residence, submit to a credit check, and sign a release of liability that absolves the seller from all future liabilities resulting from the mortgage. Other servicer-specific underwriting requirements also apply. Also, FHA allows the lender to charge a $500 "assumability" fee.
These rules apply only to mortgages originated after Dec. 12, 1989.
