Ready to Buy?

I recently read a great article on RISMedia about the fact that interest rates on the benchmark, 30-year fixed-rate mortgage recently dropped to a 38 year low. Combined with the newest tax credits, this means it is a great time to buy a home. Not sure if you are ready? Mary Ellen Podmolik gives 5 questions that may help you decide.


Q: Why are rates so low?
A: Since early January, the Federal Reserve has been purchasing mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae in an effort to stabilize the housing market by making homes more affordable for consumers. The Federal Reserve Bank of New York, which is managing the program, plans on purchasing $1.25 trillion of securities.

Q: Are rates expected stay this low?
A: It’s hard to tell, but don’t count on it because the lending landscape is likely to change next year. In September 2009, the Fed said it would gradually wind down the purchase program, ending it by March 30, 2010. That has some in the mortgage lending industry worried.

In a recently published mortgage survey, more than 60% of Bankrate.com’s panel of experts predicted that rates will move higher over the next 30 to 45 days. How much higher is anyone’s guess. Last year at this time, the average 30-year, fixed-rate mortgage was 5.53%.

Q: Why do different mortgage surveys come up with different average interest rates?
A: It depends on which lenders are in their sample, when the survey was taken and whether the rates quoted are the posted rate, the application rate or the commitment rate. Also, some surveys take into account the points paid to secure the rate.

But regardless of the survey, the general consensus is that rates are ultra-low right now and may be the lowest the market will see.

Q: What else does a consumer need to know?
A: The lowest rates are offered to the most credit-worthy customers who can make sizable down payments. Shop not just for the interest rate and the points involved but also for the fees involved, which can vary widely from one lender to another.

If you’re refinancing, remember the bigger the loan, the greater the payoff for finding a lower interest rate. Savvy customers put in their paperwork with a lender and set a “strike” interest rate at which to lock in the loan, a good move considering rate volatility.

Several refinancing calculators are available online that let borrowers plug in all the required numbers and determine the monthly savings and how long it will take to recoup the expense of a refinancing.

Q: So is now the best time to buy a home?
A: It depends on personal situations. Homebuyers certainly have a lot of factors working in their favor right now—low interest rates, plenty of marked-down homes for sale and an extended and expanded federal tax credit that will expire in the spring.

Give me a call and we can discuss if the time is right for you. I have extensive knowledge of the area and communities and would love to help you with all of your real estate needs!