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2011-09-07 09:32:42
Interest rates keep falling!! 3.75% for FHA and US

I know it seems like every week or two you are receiving an email update from me about how interest rates continue to drop. Well after holding steady after hitting all time lows a few weeks ago, rates took a significant drop in the last week. They seriously can't get much lower than they are currently!!


Here are the latest rates I have for the most commonly used mortgages:

FHA - 3.75%

USDA Rural Development - 3.75%

15 year Conv. - 3.25%

30 year Conv. - 3.875%

30 year Conv. (buying out the mortgage insurance) - 4.375%

For every percentage point (1%) on a mortgage, monthly payments increase $83/month for every hundred thousand dollars that you borrow. So the difference between a 3.75% and a 4.75% interest rate on a $200,000 loan is an additional $167/month, or $2000/year, JUST IN INTEREST!!


The additional $167/month is the same as purchasing a home that is about $25,000 more expensive at current interest rates. In other words, mortgage payments would be about the same for a $225,000 mortgage at 3.75% interest as a $200,000 mortgage at 4.75% interest. 


Here is a graph which shows how much (approximately) interest rates affect monthly mortgage payments:

Loan Amount

3.75% interest (current rates)

4.25% interest (2010)

5% interest (2009)

6.25% interest (2002-2008)

8% interest (92-02)































Monthly payments closely resemble payments for FHA, Utah Housing and Rural Development Loans (Rough estimates including Principle, Interest and Property taxes - .7% property taxes, 1% PMI and @2% MIP)

As I have previously explained, for those taking out a mortgage, the determination of both the market hitting 'rock bottom'  and a 'great deal' on a home purchase is equally determined by both purchase price AND interest rate.

With current interest rates and low home prices for both new construction and already built homes, this will very likely be the time we look back on as 'rock bottom'.

These low rates will save you hundreds of dollars each year if not more. So this half percentage point drop on an FHA loan will save you $1000/year in interest on a $200k loan, which is $85/month. 


Also, USDA loans currently don't require anything down and there is no mortgage insurance. Starting October 1st, USDA loans will begin charging mortgage insurance of .3% monthly. This is still a much better loan than FHA but the USDA loan is better now. To get the currently better USDA loan, you must lock your rate before Oct. 1. 


Home prices are low, inventory is high and getting higher, there are multiple great loan programs available AND INTEREST RATES ARE AT HISTORIC LOWS!! This is very likely the best time to buy a first home, upgrade to a more expensive home or purchase an investment property that we will see in decades. Don't let this opportunity pass you by.


As we enter the slow season for the real estate market in Utah (September through January), it is a great opportunity to take advantage of higher inventory, less demand and these previously mentioned historically low interest rates and extremely low home prices. 



To explore your loan options and to get pre-approved for a mortgage, call Mike Christensen with Lexington Mortgage at (801) 362-4394.


For any of your real estate needs, don't hesitate to contact me. 

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