Rates were unchanged last week: 30yr fixed rates were 4.32% with .8 points, which tied a record low set September 2. This figure is the national average for owner-occupied single family home loans up to $417,000.

Rates held lows for three reasons: (1) Q2 economic growth was finalized at a paltry 1.7% and the Fed’s favorite inflation reading was flat, (2) S&P’s July home price reading for 20 major cities was an OK +3.2% year-over-year, but some analysts think tax credits fueled this and prices will drop on next month’s report, (3) confirmation Friday from NY Fed president William Dudley that the Fed may resume buying mortgage bonds as soon as November to drive rates down further.

Rate Factors Week of October 4
The House and Senate approved high-limit conforming loan tiers up to $729,750 through 2011, now it’s onto President Obama to sign.

Next week’s biggest market movers will be Monday’s NAR pending home sales for August, and Friday’s Bureau of Labor Statistics jobs report for September. The August BLS reported that 14.9m people are unemployed, a 9.6% rate, and that new private sector jobs were 67,000 for August and 763,000 for 2010. September estimates call for 9.7% unemployment. If it’s a weak report, rates would likely drop.

Mortgage Insurance Primer: FHA vs. PMI

Effective with all new FHA loans originated Monday or after, the mortgage insurance is increasing. Here’s all the details: TheBasisPoint.com. But bottom line is: on a home purchase with 10% down and a $500k loan, the FHA fee changes mean $112 more cost per month. Some say this will cause a shift to private mortgage insurance (PMI). But there are two things to consider when comparing FHA vs. PMI:

(1) If we compare FHA vs. PMI on the same home purchase with 10% down and a $500k loan, the PMI deal will only be $92 per month cheaper. Same closing costs.

(2) FHA loans can be approved once, with the lender approving the loan itself and the mortgage insurance. In most cases, private mortgage insurance loans have to be approved twice, first by the lender and second by the mortgage insurer. This can create longer transactions and more things that can go wrong.

CONFORMING RATES ($200,000 to $417,000) – 0 POINT
30 Year: 4.25% (4.36% APR)
FHA 30 Year: 4.25% (4.37% APR)
5/1 ARM: 3.0% (3.12% APR)

SUPER-CONFORMING RATES ($417,001 to $729,750 cap by county) – 0 POINT
30 Year: 4.625% (4.74% APR)
FHA 30 Year: 4.375% (4.51% APR)
5/1 ARM: 3.375% (3.49% APR)

JUMBO RATES ($729,751 to $2,00,000) – 1 POINT
30 Year: 5.0% (5.13% APR)
5/1 ARM: 3.875% (3.99% APR)

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Scenarios assume full doc pricing on single family home purchase loans for borrower with 740 FICO score or greater, at least 20% equity (unless FHA), and 6-12 months reserves left over after close (retirement assets counted at 60% of value for reserves). Better or worse rates apply to specific client profiles. Better rates are available using tax deductible points. ARM rates adjust the first month after initial fixed period shown, and once per year thereafter until year 30. Adjusted rate calculated by adding 2.25% margin to 1yr LIBOR index at time of adjustment. At first adjustment LIBOR+margin cannot exceed start rate+5%, subsequent yearly adjustments can never be greater than 2% per year, total of all adjustments for 30yr life of loan can never exceed start rate+5%. This is not a loan commitment nor a loan guarantee, rates based on loan amount ranges shown and rates available at the time of production. Rates subject to change without notice. California Department of Real Estate license #01376428. NMLS # 313803. Equal Housing Lender.

Julian D. Hebron
RPM Mortgage/Van Ness Office
DRE License #01376428

Brandon Hoyles
RPM Mortgage/Levi Plaza Office
DRE License #01379328