Mortgage Rates Fall Week of June 28

Mortgage rates fell to record lows last week, with HSH Associates reporting average rates for a 30-year fixed rate mortgage (FRM) falling by 7 basis points to 5.00%. Average rates for a 15 year FRM fell from 4.53% to 4.47 %. Average rates for a 5/1 adjustable rate mortgage (ARM) fell by 10 basis points from 4.12% to 4.02%. For those buying a starter home or otherwise planning to move within a few years, the 5/1 ARM offers an outstanding opportunity at current mortgage rates.

Cruel irony haunts mortgage lenders; with average mortgage rates at or below the 5% benchmark for the week ending July 2, would be borrowers aren't jumping "off the fence" in droves. Although many homeowners would normally be refinancing to current low mortgage rates, they cannot do so due to fallen home values. Conventional mortgage lenders typically require no more than an 80% loan to value (LTV) ratio for refinancing. With many home values falling below the owners' mortgage balances, refinancing becomes impossible.

Refinancing with Government Programs or FHA Loans

If your home has lost value and you can't refinance through traditional means, the federal Home Affordable Refinance program (HARP) may be able to help. Another option is refinancing to an FHA mortgage loan, which allows up to 97.5 LTV. FHA allows rolling closing costs into the mortgage amount, or having lenders advance closing costs in exchange for a higher mortgage rate. FHA guidelines also allow cash gifts from family or friends to be used toward the down payment and closing costs.

Mortgage Rates: Getting Your Best Deal

Shopping for mortgage loans before looking for a new home provides time for researching loan options and comparing mortgage quotes. Mortgage lenders and local real estate professionals can help you learn about and take advantage of community home ownership programs and other resources helpful for first time buyers.

Our live database of current mortgage rates can help you find the best mortgage rates in your area.