Mortgage rates hit second lowest level this year

Mortgage interest rates dipped for the first time in a month and fell to their second lowest level of 2016.

Rates first plummeted in late June after the so-called Brexit referendum in which United Kingdom voters signaled their wish to leave the European Union.

Since then rates have been “steadily creeping up from the low-3 percent to mid-3 percent range,” says Justin

Lopatin, vice president of mortgage lending at PERL Mortgage in Chicago.

This week, rates gave up some of that increase.

Rates this week

The benchmark 30-year fixed-rate mortgage fell to 3.56 percent from 3.63 percent, according to Bankrate’s

weekly survey of large lenders. A year ago, this rate was 4.29 percent. Four weeks ago, it was 3.52 percent, the lowest level of the calendar year. The mortgages in this week’s survey had an average total of 0.27 discount and origination points.

■ The benchmark 15-year fixed-rate mortgage fell to 2.83 percent from 2.89 percent.

■ The benchmark 5/1 adjustable-rate mortgage fell to 3.01 percent from 3.08 percent.

■ The benchmark 30-year fixed-rate jumbo mortgage fell to 3.62 percent from 3.69 percent.

Lopatin says the combination of low mortgage rates and high apartment rents has enticed “an influx of millennials” into the housing market. He expects this window of home-buying opportunity to remain open for another 12 to 18 months, judging in part by builders’ optimistic construction of new condominium high-rises in Chicago.

Low-down loans

In related news, Fannie Mae last week announced some “enhancements” to its HomeReady Mortgage, which allows a down payment of just 3 percent of the loan amount. The tweaks are intended to make these loans available to more people who need an affordable option.

Lopatin says the 3 percent down payment loan program might appeal to borrowers in some under-served parts of the United States, though he adds that in Chicago, borrowers are more likely to prefer a 5 percent-down conforming loan or 3.5 percent-down FHA loan, insured by the Federal Housing Administration.

That comparison “forces people to realize that 2 percent of extra down payment is insignificant when you think about the drastically higher interest rate” for the 3 percent option, Lopatin says.

The FHA loan makes sense if the borrower’s credit score is also on the low side because with a small down payment and lower credit score, the FHA rate and mortgage insurance premium will be more affordable for the borrower than the conforming loan rate and private mortgage insurance, Lopatin explains.

“From a monthly payment standpoint, 97 percent financing doesn’t always get you the best option because of the higher rate and (because) individuals who don’t have enough to put down usually have some credit challenges,” he says.

Borrowers should shop around and compare the loans, rates and fees they’re offered to find acombination that fits their personal situation.