Housing market improvements continue to be seen with builder confidence on the rise along with an increase in building permits. The U.S. Census Bureau and the Department of Housing and Urban Development reported that residential building permits increased 14.3% for the month of April and was 35.8% higher than a year ago at the same time. Of this amount, single family housing permits were up 3%. The National Association of Home Builders/ Wells Fargo Builder Confidence Index rose to 44 during the month of May for the first time in five months. The outlook amongst builders for home sales during the next six months rose to the highest level in over six years. Housing Starts for April fell 17% which is most likely a by-product of the slower winter season.

According to the Mortgage Banker's Association, the Market Composite Index showed that applications for the week ending May 10th fell by 7.3% on a seasonally adjusted basis. The Refinance Index decreased 8% and the seasonally adjusted Purchase Index fell 4%. Of all mortgage application activity, the refinance share remained at 76%. Refinances continue to a major portion of activity as rates continue to remain low.

According to the most recent survey of wholesale and direct lenders, current conforming 30 year fixed mortgage rates are as low as 3.250%, 15 year fixed mortgage interest rates are as low as 2.375% and 5/1 adjustable mortgage rates are as low as 2.250%. Borrowers who have good credit are usually eligible for low mortgage rates offered by lenders. Purchase loans and regular refinances require full documentation, as well as, an appraisal in order to be considered for approval. In addition to the credit profile, debt to income and loan to value ratios are both an important part of the loan process. These things are not as significant when refinancing through the HARP loan program. HARP is a special refinance which is available until the end of 2015 for borrowers who have loans that were sold to Fannie Mae and Freddie Mac prior to June 1, 2009. Required documentation for HARP loans have been reduced and loan to value caps have been eliminated. There is no need for an appraisal in most case when applying for a HARP refinance. Borrowers should shop around for any type of home purchase mortgage or refinance since rates and guidelines are competitive.

FHA 30 year fixed mortgage interest rates are as low as 3.000%, FHA 15 year fixed rates are as low as 3.000% and FHA 5/1 adjustable mortgage rates are as low as 2.750%. FHA mortgages continue to offer homeowners a low down payment and other FHA benefits that are not available with regular conventional loans. Housing grants and loans, as well as approved gifts, can still be used with FHA loans which help to reduce the overall costs to the home buyer. FHA closing costs (APR) are high because of the upfront mortgage insurance premium and other FHA fees. However, seller concessions are often used to reduce these expenses. The FHA streamline refinance with no cash out is available to existing FHA mortgage holders and does not require any documentation or an appraisal. It is a quick and easy way to move to a better mortgage without the constraints of a regular refinance. Until the end of 2013, reduced upfront and annual mortgage insurance fees for loans that were endorsed prior to June 1, 2009 are also available through the FHA streamline program. FHA purchase loans and FHA refinances must be obtained by FHA approved lenders.

Current jumbo 30 year fixed interest rates are as low as 3.500%, jumbo 15 year fixed mortgage rates are as low as 2.750% and jumbo 5/1 adjustable mortgage rates are as low as 2.375%. Jumbo loans are non-conforming loans that require borrowers to have excellent credit in order to receive low jumbo rates. While guidelines may be different from lender to lender, most require that borrowers have substantial assets to cover the large down payment and additional months of reserves. Shopping around for a jumbo loan is a good idea because jumbo mortgage rates, which are not much higher than conforming loan rates, can be very competitive amongst lenders.

Mortgage backed securities (MBS) move with market conditions and ultimately move mortgage rates in the opposite direction. Over the past week, the following reports were released: April Import Prices fell 0.5%; April Industrial Production dropped 0.5%; The Empire State Index fell to -1.4; April PPI decreased 0.7%, however, Core PPI increased 0.1%; April CPI fell 0.4%; Core CPI, which excludes food and energy, increased 0.1%. Despite these drops, Consumer Sentiment surprising rose to 83.7 which was better than expected and is at the highest level since July 2007, according to the University of Michigan's Consumer Sentiment Index. However, unemployment claims for the week ending May 10th rose by 32,000.

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