Rates Below 4.000 Percent? No, Not Really, But Payments Have Plunged.

It’s the lowest mortgage rates in forever. Relative to history, it’s super-cheap to finance a home.

Mortgage Rates Fall To 3.94 Percent

For the first time in its 40-year history, Freddie Mac’s weekly Primary Mortgage Market Survey shows 30-year fixed rate mortgage rates below 4 percent nationwide.

The average 30-year fixed rate mortgage is now 3.94 percent.

For homeowners in places like Dallas/Fort Worth, Texas; Loudoun County, Virginia; and Potomac, Maryland, record-low rates is making for record-low mortgage payments as well. Homes are more affordable than at any time in history.

Mortgage payments based on the conforming loan limit of $ 417,000 are now 9% cheaper as compared to the start of the year:

• January 2011 : A $ 417,000 mortgage cost $ 2,180.30 per month
• October 2011 : A $ 417,000 mortgage cost $ 1,976.42 per month

There are similar savings for loans at the jumbo-conforming limits of $ 625,500.Lower rates means lower payments.

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Sub-4 Percent Rates? It’s Lender Sleight-Of-Hand.

Here’s the thing, though. Rates aren’t any lower this week than last. Rates didn’t all-of-a-sudden dip below 4 percent. What you’re seeing in the headlines is lender sleight-of-hand.

Rates did fall below 4 percent, but at the same time, the required discount points to get that rate rose. Discount points, of course, are prepaid interest to the bank. They’re called “discount points”, in part, because they get you a discount on your mortgage rate.

Paying more discount points affords you lower mortgage rates; dropping to 3.94 percent with 0.8 points is the same as last week’s north-of-4-percent rate with a less-costly 0.7 points.

As I wrote today on Twitter:

Stated differently : Lenders “sold” lower rates, but at the same time, raised their fees. Rates aren’t suddenly under 4-percent, in other words. They’re just being reported differently.

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Jumbo Mortgage Rates Lower Than Conforming

One sector of the mortgage markets that’s worth watching is the jumbo mortgage market. This week, rates did fall for jumbo mortgages and, with a modest 20% equity stake, 5-year ARMs fell below 3.000.

And that’s with no points whatsoever.

Conforming mortgage rates are cheap today, but jumbo loans are cheaper. And that makes for very low mortgage payments. There’s a lot of money to be saved right now.

Click here to get a rate quote.