The United States Department of Agriculture (USDA) continues to defy Wall Street, which seems to be the only financial group unable to discern a proper forecast. The current USDA mortgage rates have remained low in the face of a swath of pinstriped Manhattan analysts saying that it would go up by this time in 2016. Here are the current USDA mortgage rates and the forecast from the real estate industry for the rest of the year.
What are the current USDA mortgage rates?
Keep in mind that the bench-mark mortgage rate is based upon certain criteria, including the 30 year term, a 20 percent down payment, no mortgage points paid up front, and a great credit score that is above 740. However, USDA loans may allow a bit of a subsidy for borrowers who do not meet these standards because of the USDA’s status as a well credited government entity.
The current benchmark USDA mortgage rate is not directly monitored by the benchmark Primary Mortgage Market Survey (PMMS); however, it is known that the interest rate is lower than the conventional mortgage rate, which is monitored. Currently, the conventional interest rate with benchmark credentials is around 3.71 percent. This means that the USDA mortgage rate is lower than 3.71 percent on average. This average interest rate has been firmly entrenched over the year, and outside of a jump in the 30 year fixed interest rate in the last week of March, the trend lines look almost flat.
What are the reasons behind the current mortgage rates?
USDA mortgages are based around buying a home in an underserved area. These areas usually have lower overall populations, low population density, and up and coming nearby commercial districts. These areas usually have a lower property value and less competition for the housing. Banks cannot charge higher interest rates in these areas in the first place; there is no premium for location or social culture. Combine this with the fact that most USDA borrowers do not have ideal financial resources and you create a market that lends itself to lower interest rates even without the government insurance. The fact that USDA is a government entity lowers the risk profile of the borrowers, allowing the banks to keep the interest rates low in these areas. This is the background of any USDA loan that must be considered before the individual property, the location, and the financial status of the borrower.
The market is the second consideration, although the fact that the government is subsidizing the loan somewhat protects the negotiation from the full brunt of any movement in the free market. Fannie Mae and the Mortgage Bankers Association both maintain analysis on mortgage rates, and both institutions are predicting a rise of at least one percent in the mortgage interest rates by the end of the year. However, these institutions have been wrong before, and even the Federal Reserve will not make a definitive statement about the rates for the rest of 2016. Keeping interest rates in general low will play a huge part in keeping the USDA mortgage interest rates low, and the Federal Reserve is not making any rumblings of changing its historic low rates of the past six years.
What is the forecast for the rest of 2016?
The mortgage rates for 2015 consistently flew in the face of predictions, and there is a chance that the 2016 behavior of mortgage rates will do the same. The Federal Reserve has yet to raise its rates significantly, and housing starts have not increased a great deal in the areas that are covered by the USDA. The majority of the growth in the housing market occurred in some of the bigger markets the West; the rest of the nation actually experienced a loss in housing starts of around 2 percent. If analysts are taking their estimates from the total statistics around the nation, they might be distorted because of the geographically distorted nature of the numbers.
The relative stability of the first quarter of the year speaks to a likely stability throughout the rest of the year. Even if the mortgage rate for the market rises by the percentage point that Fannie Mae or the Mortgage Bankers Association says that it will, the USDA loan rates will not rise as much. This means that 2016 will likely remain a great year for borrowers throughout the entire year, especially if you take advantage of the many advantages that the USDA loan programs have waiting for eligible home buyers.
What is the easiest way to get a good USDA loan?
The USDA Streamline Refinance program is one of the best ways to get a USDA loan at the lowest rates. The Streamline program is not only quicker for you because of less paperwork, it is also easier for banks to process, resulting in a low interest rate.
2 Point Highlight
This average interest rate has been firmly entrenched over the year, and outside of a jump in the 30 year fixed interest rate in the last week of March, the trend lines look almost flat.
Fannie Mae and the Mortgage Bankers Association both maintain analysis on mortgage rates, and both institutions are predicting a rise of at least one percent in the mortgage interest rates by the end of the year.
