Low interest rates this year have lulled many people into believing that home loan rates in the 5.00% and lower range are “normal”. This is not the case and if you are in the position where you could refinance or are considering buying a home, complacency is not your friend.
Stimulus provided by the Obama administration has been instrumental in creating the environment that has lowered rates, increased home sales and assisted distressed homeowners.
Uncle Sam Lends a Temporary Hand
Tick tock, tick tock. Just as summer turned to fall on September 22nd, deadlines await two programs that supplied the heat directed at the housing markets.
Government programs in the housing and interest rate arenas are slated to end in coming months. The time to take advantage of these programs is now. Stimulus programs from Washington have led to incentives for first time home buyers (FTHB), artificially low interest rates, and typically unallowable refinance transactions.
Infinite stimulus for the housing sector is not in the cards nor is it reasonable to expect. Deadlines are approaching. Whether you want to buy a home or need to refinance one, do not procrastinate. The best path is to investigate options now before you may find that none are available to you.
First Time Home buyer Alert
If you are a FTHB who wants to take advantage of the tax credit, think two words. GET BUSY. The tax credit of up to $8,000 is set to expire November 30th. While there is talk that this program may be extended, nothing is certain and millions of FTHBs have already taken advantage of the credit. With real estate closings taking as long as 60-90 days, according the National Association of Realtors, you need to get under contract shortly if you want to take advantage of the tax credit.
Home prices are down significantly across the country from their high points the past few years. However, median home prices in August were up 7.8% from their low point earlier this year. If you have been waiting for home prices to decline further, perhaps you should not. Great opportunities are available but many real estate agents report multiple contracts being offered on hot properties. If you wait, you may be disappointed.
Check with your mortgage professional to see if he or she can accommodate you if you go under contract in the next two weeks. Many lenders will still be able to help you but only if you have all your paperwork in order.
Rates Are Great – NOW!
Interest rates dipped in late September to near the lowest points ever recorded. As reported by Freddie Mac, rates for conforming loans approached 5.00% for a 30 year fixed rate and below 4.50% for a 15 year fixed rate with additional fees paid to obtain these rates. Rates for FHA, VA, and USDA Guaranteed loans typically offer slightly higher rates.
There is one reason that home loan rates are as low as they are. Last November the Federal Reserve announced a program to purchase up to $1.25 Trillion in mortgage backed securities. This effort lowered rates to the lowest level of all time and has kept rates, according to Freddie Mac, below 5.50% this year compared to rates as high as 6.48% last year for a 30 year fixed rate.
This program was slated to end December 31st of this year but in September’s Federal Open Market Committee meeting, it was announced that the program will be extended to the end of the first quarter of 2010. However, the amount the Fed will purchase will not change.
Peter Hooper, chief economist at Deutsche Bank, told Bloomberg that a sudden end to the Fed purchases could cause rates to rise by a half to one percentage point. If you delay your financing, you could well see rates that are significantly higher than what is available today.
Upside Down – Refinance to 125% of Value
Even if you owe up to 125% more on your mortgage than your home is worth, you may be able to refinance. For example, if your home is worth $200,000 but you owe more than that, qualifying homeowners can now refinance up to $250,000.
The Making Home Affordable program was initially structured to accommodate homeowners with a new loan to 105% of their home’s value. This has recently been increased to 125%. There are requirements to qualify including whether your loan is currently owned by either Fannie Mae or Freddie Mac. You can find out if your loan is held by either agency by going to the Loan Lookup section of the Making Home Affordable web site.
According to First American Core Logic, more than 15.2 million homes had negative equity in June of this year. This represents nearly 33% of all mortgaged properties across the country. Where in the past, being upside down on your loan would have precluded your ability to seek relief, you now may have an opportunity.
With incredibly low interest rates and current stimulus programs available to help many, explore the options that may best suit you but do so quickly. However, just as you wouldn’t go out Trick or Treating on November 1st, options that exist today may not be available to you should you wait.
Contact your mortgage professional today to explore the best path to take. You may find that the best “treat” available is one that puts thousands of dollars in your pocket.