From the Courier News:
Depressed by investors seeking safe-havens, the average interest rate on a 30-year fixed mortgage fell this week to its lowest level ever, 3.94 percent, mortgage company Freddie Mac reported Thursday.
The decline could allow more buyers to afford homes and bolster the dormant housing market. And it could allow more owners to refinance, lowering their monthly mortgage payments and giving them more money to spend elsewhere in the economy.
Consider a homeowner who owes $250,000 and is paying 5.09 percent on a 30-year fixed mortgage that he or she got in 2010. Refinancing the loan at 3.94 percent now could save him or her more than $2,000 a year.
For example, someone who got a $200,000, 30-year mortgage at fixed at 5.25 percent last year was paying about $1,100 per month. That same person today can get a 20-year mortgage at 3.75 percent for $1,185. And if that person wants to go to a 15-year mortgage with a fixed rate of 3.25 percent, they would pay about $1,400. The attraction of the 15-year loan is that unlike longer-term mortgages, even on the first payment of a 15-year loan, more of that money would go to paying off the principal than the interest. Amity makes loans to borrowers throughout the state.
“The comeback is not here yet,” said Christopher Randall, a vice president at Real Estate Mortgage Network, a mortgage lender in Edison. “We are seeing more activity, but it’s not rampant considering where rates are.”
Brian Jennings, president of Princeton Home Mortgage, the in-house mortgage company for Weidel Realtors, and Home Capital Network, the in-house mortgage company for Prudential New Jersey Properties, said that there is money available to all sorts of borrowers, but they need to understand that not everybody qualifies for the lowest rates. People with poor credit scores or people with low down payments cannot expect to get as good a rate as someone with a FICO credit score above 800 points and a large down payment because low scores and small down payments represent higher risks to lenders. For example, a person with a credit score between 720 and 739 will pay more for the same loan than someone with a credit score of 800 points. Or, a person with a credit score of 800 points and a 40 percent down payment will pay less for a loan than someone who only has a 10 percent down payment.
“We close loans every day for people with all sorts of credit,” Jennings said. “We have products for people with lower scores, but lenders are taking a bigger risk with them, so they will charge a higher rate.”