When it comes to inflation, our economy seems to be on a schizophrenic thrill ride. Just last week it looked like inflation was picking up at the wholesale level so the mortgage market tanked in response. But inflation never appeared at the retail level so we gained all the losses back toward the end of the week and ended up right back where we started! So while interest rates have ticked up a bit due to the overall market, we are doing much better than it looked like we would be doing last week.
Many experts believe that the news from the Fed in regard to inflation and moving out of securing mortgage loans is a precursor to rates rising throughout 2010, making early 2010 a good bet for the lowest rates of the year. This coupled with the tax credits for both first time home buyers and those moving up in a house or downsizing makes early next year a great time to consider purchasing a home. Maybe the best Christmas present to yourself and your family is to buy a house. If you are waiting for a good deal to do so, this would be the time to get it!
It’s been said many times over the past couple of years that the mortgage rates are at “historic lows” and then they go back up a little bit and you hear they are still really low. While some people seem to perpetually “chase the rate” and hope to get it at an all time low, sometimes it’s just good to get a better payment and deal while you can.
Last week mortgage rates fell again to one of these almost to the all time lows and people were clamoring to see how much they could save on their payment. I talked to one of my lender friends and he told me one thing to always keep in mind when someone asks about saving money; are you looking to save money overall or just monthly? What people need to remember is it costs money to close even a refinance loan and those that tell you it is at no cost most of the time means it’s at no money out of pocket to you. The money comes out of the equity in your property and that will cost you at the time of sale.
The Federal Reserve has met for the two days earlier this week in order to discuss the next move in regard to interest rates as well as whether to maintain some of the aggressive programs that were put in place this past year to fight back the devastating consequences of the failing economy. They did announce on Wednesday, August 12, 2009 that it will keep short-term interest rates at a record low in order to further stabilize the U.S. economy. Though this may seem to be a bad sign, the Fed also signaled confidence in the recovery, saying economic activity is “leveling out.”
This is just another step toward our economy coming back around though everyone does expect the progress to be slow. If you go back to other economic times you will note that unemployment is one of the last areas that rebound so we may be seeing that number rise even more before it finds its tipping point and dips into acceptable levels once more. This is much better news than we were getting six months ago and there will be challenges ahead but as a nation we are going in the right direction.
With all the financial news and goings on, it is good to know that interest rates for mortgages are still good right now. They seem to go up a little and then down a little and stay somewhere between the high 4’s to low 5’s. That’s not to say that rates won’t go higher or lower since no one is ever able to predict exactly what will happen. All we have are the trends so that’s all we can look at to see if rates are staying relatively healthy for buyers. Today’s interest rate trends definitely are good for buyers. However, there are some other things to consider in today’s market.
The cost of the loan is something that you will need to consider as well as the overall housing market in your area. Working with a good mortgage loan officer and a real estate professional should help you make good decisions, if you are in a place to purchase a home. Even though rates are low, you will need to have at least 3.5% to put down on the home as well as up to 3% closing costs money if the seller is not able to negotiate paying some closing costs. Be prepared and you will come out ahead of the game!
As my mortgage person tells me, “timing interest rates is no more affective than timing the stock market”. I guess it’s true because I have heard several people lately say things like; “I’ll buy a home once the rates bottom out” and “I won’t refinance until I can get the lowest interest rate possible”. The trouble with this type of thinking is that the interest rate may have bottomed out or not! Know one knows when interest rates are going up or down.
Another misconception has the interest rates for mortgages either tied to the bank rates (rate for money borrowed from the Fed or from bank to bank) or prime and mortgage rates are not calculated on either of these factors except for HELOC loans (Home Equity Line of Credit). There are a lot of things that go into how rates are calculated and I have been told it is not unusual for rates to shift and change several times a day. So I agree with my mortgage people that whenever you have money to put down (3.5% or better), a stable employment history, a good income and good credit history; it’s a good time to buy for you. Yes, get the best rate and cost at the time but don’t try to time the market. You may just miss a great opportunity by waiting too long!
In a surprise move on Tuesday the Fed’s cut was 75 basis points or .75% down to a level never seen before in our history. In a statement put out by the Fed it included the following; “The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability. In particular, the Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.”
There are rumors of rates falling into the 4.5% range in the near future and remaining low throughout 2009. However, as always, there were rumors not 6 months ago that we would be paying $5.00 a gallon gas by Christmas this year. I filled up yesterday and paid $1.42 a gallon. If you are interested in purchasing a home in the near future and can qualify, it is a great time to buy a home.
If you were wishing that rates would come down again; your wish has come true! Rates went down substantially at the end of last week with the announcement that the government is picking up some of the more toxic mortgage backed securities that are held by the largest of banks.
Though no one knows if this move will help maintain these rates, we do know that it looks like, at least for the short term, these rates will help more people qualify for home loans. You really do need to get qualified with a lender before you start looking for a home to buy. Don’t get your hopes up just to have them dashed once you find out you don’t qualify. I’ve seen how hard this is on people and it just makes since to get qualified first. It makes the process for everyone easier.
Just a short update for first time homeowners; THDA has increased their rates on all of their programs. They include:
THDA Great Rate – 6.10%
THDA Great Advantage – 6.60%
THDA Great Start – 7.10%
Find a trusted lender that can help you with your loan if you are ready to purchase a home and need some help deciphering which mortgage is best for you. Some of the qualifications for these 3 programs are the same but they have different benefits based on your current situation. Not all lenders are approved by the Tennessee Housing Development Agency so you will want to make sure you start with an approved THDA lender. You can always contact me if you
