Latest Mortgage Data Paints More Hopeful Housing Picture

The good news for the housing market is mortgage rates are at rock bottom and last week saw a lot of new applications for mortgages.

However, the problem of actually getting approved for a mortgage remains.

In its weekly report today, Fredie Mac said average fixed rate mortgages remained largely unchanged, near historic lows. A 30-year fixed-rate mortgage(FRM) averaged 3.99 percent with an average 0.7 point for the week ending December 8, 2011, down from last week when it averaged 4.00 percent. Last year at this time, the 30-year FRM averaged 4.61 percent.

A 15-year FRM this week averaged 3.27 percent with an average 0.8 point, down from last week when it averaged 3.30 percent. A year ago at this time, the 15-year FRM averaged 3.96 percent.

"Thirty-year fixed-rate loans have declined 0.62 percentage points from a year ago, and median sales prices on existing homes are off 4.7 percent in the year ending with October,” said Frank Nothaft, vice president and chief economist, Freddie Mac. “These low rates and home prices have pushed housing affordability to record highs this year.”

You still need 20 percent down

However, to qualify for those low rates, a borrower needs at least a 20 percent down payment and sterling credit. Even so, the Mortgage Bankers Association reported this week that applications for new home purchase mortgages surged 12.8 percent from the previous week. That's not as big a gain as it might seem, since the previous week included Thanksgiving and Black Friday, when consumers were shopping for other things besides houses. Still, industry officials say the increase is a hopeful sign.

“Coming out of the Thanksgiving holiday, applications increased significantly as mortgage rates dropped to their lowest levels in about two months,” said Michael Fratantoni, MBA's Vice President of Research and Economics. “In particular, refinance applications increased sharply, with some lenders seeing refinance volume double. Despite this surge, aggregate refinance activity is still below levels reported two weeks ago. Some lenders indicated they are beginning to see an increase in HARP loans, but that increase is still a small portion of the move this week."

The problem

No one argues that affordability conditions have never been better. Home prices are back to pre-bubble levels and interest rates are low. Getting a loan remains the stumbling block.

The National Association of Realtors (NAR) says would-be home buyers must be aware of the new environment and take extra precautions to make themselves suitable to mortgage lenders.

“Many potential home buyers inadvertently hurt their credit scores and chances of getting a mortgage through easily averted actions, such as cancelling an old credit line while taking on a new one,” said Lawrence Yun, NAR's chief economist. “Such actions could unwittingly prevent buyers from obtaining a mortgage if their credit score is close the margins of qualifying, or they might get a loan but with less favorable terms.”