Mortgage Rates Drop For Second Week

Mortgage rates for most of the major mortgage products fell again this week. Although the drop was not as substantial as last week it is still nice to see rates come down this week. The 30 year mortgage rate fell from 6.20 to 6.14. The small movement this week marked a departure from the wild swings we have been experiencing recently. In fact the drop of .06 points in the 30 year mortgage rate was the first time 30 year rates didn't move over .20 percent since October 9th. That said I would not preclude the possibility of us experiencing some more wild fluctuations over the next month. Nothing has happened that would seem to stabilize the markets. Looking at the other mortgage products 15 year rates dropped .07 points (from 5.88 to 5.81) and 5 year arms dropped .21 points (from 6.19 to 5.98). The 1 year arm was the only rate to increase moving up .08 points (from 5.25 to 5.33). Below are rates for the major mortgage products for the last few weeks.

November 13, 2008
30-yr 6.14 15-yr 5.81 5-yr ARM 5.98 1-yr ARM 5.33

November 6, 2008
30-yr 6.20 15-yr 5.88 5-yr ARM 6.19 1-yr ARM 5.25

October 30, 2008
30-yr 6.46 15-yr 6.19 5-yr ARM 6.36 1-yr ARM 5.38

October 23, 2008
30-yr 6.04 15-yr 5.72 5-yr ARM 6.06 1-yr ARM 5.23

October 16, 2008
30-yr 6.46 15-yr 6.14 5-yr ARM 6.14 1-yr ARM 5.16

Looking at changes in mortgage rates is interesting but it's always nice to see what they translate into as far as a mortgage payment. Using our free mortgage calculator we translated the rates for the last two weeks into what they would mean for a 200k mortgage.

November 13th
30-yr $1217.16
15-yr $1667.25
5-yr ARM $1196.53
1-yr ARM $1114.33

November 6th
30-yr $1224.92
15-yr $1674.77
5-yr ARM $1223.64
1-yr ARM $1104.40

October 30th
30-yr 1258.87
15-yr 1708.31
5-yr ARM 1245.77
1-yr ARM 1120.56

So in the last two weeks the monthly payment on a 200k loan would have dropped $41.10 from $1258.87 to $1217.16. So what would be my advice for people looking for mortgage rates right now? First off I would avoid the 5 year arm. The small difference between the 5 year arm and the 30 year mortgage makes the 5 year arm pretty unappealing. In addition, the unstable nature of the market makes locking in to a longer loan term more appealing. If one gets a 30 year loand and rates move down they can always refinance to take advantage of the lower rate.

We talked a lot about rates but the other major factor in today's market is the difficulty of getting approved for financing. Banks have become more reluctant to give out loans and that means credit scores are very important. If you are thinking of getting a mortgage soon I would start looking at your credit sooner rather than later. Also no doc loans are pretty much dead. So if you are self employed and received a no doc loan in the past I would not expect to get one in the current environment. So that basically means its a good idea to start preparing for a loan earlier in the process (talking to a loan officer, getting paperwork ready). Talking to a loan officer at later in the process without prepared documentation is probably a recipe for disaster.

So what is going to happne with rates over the next few months. Mortgage rates have been swinging wildly up and down recently. I expect to see some more large swings moving forward. That said I expect rates to stay roughly between 5.8 and 6.6. I don't expect them to fall below 5.8 as long as banks have an uneasy feeling about the market. I don't expect them to go above 6.6 any time soon because the government has made it clear they are going to do whatever they can to keep rates low.

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