December 12, 2008

Mortgage Interest Rates Drop Again!

Posted to Geneva Lake Area , Julie Sarton

Local lenders around the Lake Geneva Area have reported new rates for a 30 year fixed rate mortgage from 5.3%, all the way down to 5%. Rates for first time home buyers with a 30 year fixed FHA loan are around 5.375%, and they only need 3% down (which can now be gifted from a family member). While rates are plummeting, restrictions are on the increase. Since mortgage insurance companies have tightened their requirements with lenders, however, if you put less than 20% down on a conventional loan, your debt to income ratio cannot be over 45%.

Further rate decreases may also be forthcoming; the Federal Reserve is considering a plan where they would purchase up to $600 billion of mortgage-backed securities and other debt issued by Fannie and Freddie and the Federal Home Loan Banks. Those institutions would then make cash available to the mortgage market for home loans, with the caveat that the resulting mortgage rates cannot exceed 4.5%. These mortgage loans would be available only for home purchases, and could not be used to refinance existing home loans at higher interest rates. Buyers seeking these low rates would have to document their income, and qualify for guarantees from Freddie Mac, Fannie Mae, or the Federal Housing Administration. Although this move would not benefit properties currently in foreclosure, the hope is that such low rates would stimulate buying and, therefore, reduce future foreclosures.

The potential for these low rates to stimulate the housing market is very positive. Once the housing market revs up again and some of the over-abundant inventory is depleted, the normal sequence is for housing prices, and perhaps interest rates, to increase with the demand. Now may be the best time in years to buy; we have many properties to choose from and sellers motivated to make the sale, local lenders ready to work with qualified buyers, and outstanding rates. For those waiting in the sidelines for the absolute bottom, the only way you really know it was the bottom is by looking in the rear view mirror….and then it’s too late! For information on local lenders, call me at 262-949-7651. Put me back to work…I’m ready!

Posted By: Julie Sarton

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