In spite of the stock market rally last week, the FHA loan rates have held right at the 5% range over the past week.

Given that the FHA loan requirements are some of the most flexible in lending, this is fairly incredible.   The FHA rates sit roughly even with Conforming loans right now.

For borrowers with 3.5% down, there is no comparison.  FHA is the only game in town.

For borrowers with 5% down, the monthly mortgage insurance factors between the two loans can very quickly tip the scales in favor of the FHA mortgage.

Here’s an example:  A 680 FICO score, for a conforming loan at 5%, carries a mortgage insurance factor of 0.94% on this sheet from PMI.  For an FHA loan at the same level, it is .5%.   The FHA up-front mortgage insurance premium is 1.75% so the break-even is roughly 4 years.  In the past, it wasn’t uncommon for the Conforming loan to outperform the FHA loan on Day 1 until the end of the loan.

My how times have changed…

We’ve had a flood of good economic news in the past day or two, but mortgage rates have held their own.

The Fed’s statement offered muted optimism that the economy is improving and that housing has stabilized.  Jobless claims were slightly lower and the stock market is rallying.

Still, mortgage rates have held steady.

The FHA loan rate dipped back to about 5% with no points in the past two trading sessions.  We’ll see if today’s rally holds up, but that is an incredible rate when you consider that we’re only 4 months away from the Fed no longer subsidizing rates.  The difference between buying a home today and buying a home in 4 months could be a full 1%.  If so, today’s homes look even more affordable.

A very busy week starts rolling today.  The Fed starts the two-day meeting today and the Policy Statement is the big one tomorrow.  The Jobs data on Friday could also be a big mover.

Warren Buffet’s Berkshire Hathaway announced a $44 Billion acquisition of Burlington Northern Sante Fe Corp.  This is an extremely bullish play on the U.S. economy and a big play from the old sage.  It will be interesting to see how this ends up moving the stock market.  Futures will still lower in morning trading.

Tuesday:
10:00 Sept factory orders (+0.9%)
2:00 Oct auto and truck sales

Wednesday:
8:15 ADP Oct job loss estimate (-190K)
10:00 Oct ISM services sector index (51.5 frm 50.9)
2:15 FOMC policy statement

Thursday:
8:15 ADP Oct job loss estimate (-190K)
8:30 weekly jobless claims (-10K to 520K; continuing claims 5.75 mil, down 5 mil)
Q3 productivity (+6.5%)

Friday:
8:30 Oct non-farm jobs (-175K; unemployment 9.9% frm 9.8%)
10:00 Sept wholesale inventories (-1.0%)
3:00 Sept consumer credit (-$10.3B)