I am feeling excited about the future of mortgage rates lately . Why? Well the buzz is that home loan rates will come down to a low 4.5% within the next month. Treasury is focusing on lowering rates to stem the foreclosure crisis. However, how they will do it has not been revealed. The only information they have released so far is that they are looking for additional ways to help the struggling housing market and is convinced that lower rates will be required.
One of the ways they might lower rates can be seen in their willingness to purchase mortgage backed securities as direct debt issued by various lenders. This news has since forced the bond prices to increase which conversely push down mortgage interest rate. However, this is a moving target, because one week bonds rise while another it fall.
We know the Federal Government does not directly dictate home loans rates. Rates are derived from price movements of mortgage backed securities , which compete in the open market. Since this is an open market it is not only the Treasury can buy or sell mortgage bonds but they must compete well. So the market is not left up to Treasury Department to lower rates.
Just like the stock market no one really knows it's future movement one hundred percent. However, the government must really be careful that they don't manipulate the market, because it could destroy the current mortgage securities market, which could cause additional collapse of the economic market.
However, even after saying all of that I do believe rates are going to 4.5 % within a few months at least. Lowering of the mortgage rates will open the market for those not in foreclosures and would like to refinance for lower rates. Currently we are at historic lows for rate and house prices are trending lower as well. All this makes it an excellent scenario for those who are looking to refinance or purchase. Therefore, if rates go to the 4.5 percent I am looking for this to create one of the largest refinance booms since the nineteen nine ties.
The only problem with this perfect scenario is refinance requires a new evaluation of your home. Currently appraisers are being a bit tight by appraising the subject home at the low end. They are lowering the risk for the bank but preventing a great opportunity for you to lower your mortgage payments. So for homeowners to position themselves to take advantage of the lower rates you might have to make sure their property is in excellent conditions, prepare it like you are going to sell it. Look at things like curve appeal, kitchen and bath room condition. Some of this upgrade don't cost a lot of money but can deliver a good presentation.
Also your credit is going to be crucial in getting the best rate possible. Only a few months ago 620 middle score was good, today we are talking about 700 as average. In other words if you have a 740 you can get a lower rate with less adjustment or cost. With 1 in ten homeowner is in foreclosure it is getting more difficult t o reach or maintain the 740 or more. Recent layoffs is making it difficult to pay the bills on time or at least pay down the current credit cards to increase your scores.
So there go the two major factors that must be considered if you're to get a lower rate: the appraisal and your scores. I did not forget income but I am sure if you don't have that really it is next impossible to get a loan in the first place. Today some lenders are offering 5.125 with some points others are at 5.3%. Therefore what I am putting forward is not out the realm of possibility.
Take for example a loan at $400,000 with a current rate of 7.5 rates over a 30 years payments verses one at 4.5% at the same 30 years, look at the difference. The numbers I am showing does not include you insurance or taxes, but just principle and interest payments. Rate at 7.5 monthly payments $2796.86 verses at 4.5 % monthly payments $2026.74 saving $ 770.12. Here is the better news total interest for the 4.5 % is $329,626.85 while the 7.5% total interest is $606,868.89. Wow!!! over 277 thousand difference. Of course if you had two extra payments to your account each year that numbers go down even more.
I think I have reasons to want to see this happen sooner than later. Building equity will come in time but what you do now can remove so much of your interest payments while accumulating equity. I hope you position yourself to take advantage of this move of a 4.5 rate.
Integrus lending group is monitoring the market to take advantage of the lowering of the interest rate. The key to such interest rate is timing. Question such as when to lock or float must be answered up front or at the time of application. Using certain mortgage software or relaying on expert who watch the market we can make an inform choice to get the best rate for our clients. Also we are able to reduced the cost up front making it a win, win scenario for both the homeowner and the lenders. http://www.squidoo.com/stopsforeclosures or http://360.yahoo.com/ghaughtons
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