What You Need to Know About 30 Year Fixed Mortgage Rates

30-Year-Fixed-Mortgage

If you knew the history of 30-year fixed mortgage rates, you might be more motivated to buy a home with a 30-year fixed rate mortgage as soon as possible. You have more good choices in a fixed-rate 30-year mortgage now than ever before. 

Are today's 30-year year fixed rate mortgage rates a good deal?

Does an old-fashioned clock chime 12 at midnight? Back in 1981, 30-year fixed mortgage interest rates were a whopping 18%. That’s right: almost 20% interest on home loans. Home prices were a lot lower in the 1980s, but 18% is still a very high rate.

In 2008 when the mortgage crisis hit so many U.S. homeowners, mortgage rates were about 6.5%. Since the crisis, mortgage interest rates have been falling. They reached their lowest point at an average of about 3.5% in 2016. In 2018, the average fixed rate 30-year mortgage interest was 4.7% according to Bankrate. You can find 30-year mortgage interest rates starting at 3.55% and up. 

What are the advantages of a 30-year fixed rate mortgage?

  • Lower monthly payments: Mortgages are amortized (reduced according to a formula) over 360 monthly payments in a 30-year fixed mortgage. Monthly payments for 30-year mortgages are lower than the payments on shorter loan terms, like 15-year mortgages.
  • Predictable and stable: 30-year fixed rate mortgages don’t change. You can plan your finances more easily with stable 30-year fixed rate mortgages.
  • Afford a better house: With lower monthly payments, you can take out a larger total loan using a 30-year mortgage and buy a better property.
  • Supports savings and investment: If your monthly payments are affordable, you can set aside money for other needs, like investments, retirement, and college costs.

What are the disadvantages of a 30-year fixed rate mortgage?

  • Higher interest rates: Interest rates for 30-year mortgages are usually at least half a point higher sometimes more than 15-year fixed rate mortgages.
  • Buying too much house: You could be tempted to buy a house that’s really more than you can afford with low interest rates and monthly payments spread out over 360 months that give your family little financial breathing room.
  • More total interest paid: You’ll pay significantly more interest over 360 monthly payments in a 30-year mortgage than you with over the 180 monthly payments you’ll make on a 15-year loan.

There’s a lot to consider when buying a home. A 30-year fixed rate mortgage could be the right choice for you, or you may find other mortgage terms such as a 3/1 ARM, a 5/1 ARM, a 7/1 ARM, or even a 10/1 ARM to be the better option.  Or alternatively some of the more financially sophisticated or savvy investor types have been opting for the interest only ARM’s, or fixed interest only mortgage loans; as a way to get in on home ownership and benefit from appreciation gains in equity, and tax benefits of home ownership, all the while making lower monthly payments similar to renting.  But with renting there is no upside of equity gain, which home ownership provides. So there is definitely a lot to consider.

 As an independent mortgage broker we make sure we provide consumers as many options and products available and help them make a decision on their own that is most beneficial for their specific situation. These options aren’t available at the big box retail banks and lenders, who are only able to sell and originate loan products specific to their company.  These options are only available with a wholesale independent mortgage broker since the broker is not limited to only 1 companies products but a great broker is setup to originate with dozens of lenders, and in some cases well over 100+ unique lenders. 

10 Things You Should Know About Jumbo Mortgages

Jumbo Mortgages

Like their names, jumbo home mortgages and super jumbo home mortgages are large and even larger. In some counties in the U.S., a jumbo mortgage is any mortgage bigger than $484,350. This isn’t the case in Los Angeles and Orange counties. As higher-priced real estate markets, jumbo mortgages on single family homes in LA and Orange counties are any amount over $726,525. A super jumbo mortgage is typically one that is over $1.5M and in higher priced area’s in California, especially Southern California and in Northern California we routinely see super jumbo loans in the $10M to $20M loan amount range.

The size of jumbo loans isn’t the only thing that’s different about them. We’ve put together a list of 10 things to know about jumbo home mortgages:

1) Jumbo loans are “nonconforming” loans. This means they don’t “conform” to the limits for loans that are sold to Fannie Mae or Freddie Mac. These government-sponsored mortgage associations protect lenders against defaults and resell mortgages to investors.

2) Jumbo loans are non-conforming but still conventional mortgages. A conventional mortgage is a non-government insured mortgage. FHA mortgages have the mortgage insurance insured by the government.

3) Jumbo loan and Super Jumbo loan interest rates can be fixed or adjustable APR (annual percentage rate).

4) Jumbo loan credit scores should be strong. Most jumbo mortgage lenders ask for credit scores of 700 to 720 or higher.

5) Your DTI should be low. Lenders like to see a debt-to-income ratio (DTI) of less than 41% up to 45%. You need to have relatively low debt for a regular jumbo home loan. However, there are many other Jumbo and Super Jumbo loan options now available with slighltly higher interest rates that allow up to 50% DTI ratios.

6) You’ll need cash reserves. Could you cover up to a year’s worth of mortgage payments from your liquid cash reserves? Many jumbo mortgage lenders will ask for documentation of cash reserves.

7) Jumbo mortgages need more documentation. The majority of jumbo mortgages require thorough documentation, including tax returns, investment accounts and bank statements. Business profit and loss information may also be required. In some cases Jumbo and Super Jumbo mortgages may be available with limited streamlined documentation such as not using any tax returns, but instead using bank statements and/or profit and loss statements.

8) You may need more than one appraisal. Because jumbo mortgages represent a risk to lenders, they may request a second property appraisal to confirm property value.

9) Higher down payment. You can get a low or even no down payment on some loans, but not for jumbo mortgages. You will need to put down at least 10% of the purchase price up to 20% or more.

10) Interest rates differ. For a long time, jumbo mortgages and super jumbo loans had higher interest rates than conforming loans. But in housing markets like California, you can often find rates competitive with, or in certain cases lower than, the rates offered on smaller conventional mortgages.

You can find jumbo mortgages that will fit your needs, home purchase plans, and financial goals. Work with a jumbo mortgage specialist who understands how these larger mortgages are financed and approved. You will soon find yourself owning that dream property you desire. These jumbo and super jumbo mortgage loans are also available for non US Citizens, including both Permenent Residents Green Card Holders, and also Foreign Nationals. Super Jumbo Loans include those that can be $10 Million or $15 Million or higher loan amounts.