Mortgage Interest Rates At Ridiculously Low Levels

It’s been awhile since I posted but I’ve been able to get a couple free minutes and had to point out what’s happening in the mortgage industry these days.  Over the past week Treasury Notes and Mortgage Backed Securities keep gaining in appeal as investors move out of the stock market into the safety they offer.  Today we saw a huge drop in both the Dow Jones and S&P 500 indexes along with the yield on Treasuries as they become more in demand.  So what’s it all mean to the average person in need of a home loan??

Unbelievably low interest rates not seen in most of our life times.  We’re talking about 30 Year Fixed in the 4.25% range, 15 Year Fixed around 3.75% and 30 Year Fixed Jumbo Loans around 5.25%.  If you’re looking to purchase a home you’re going to be able to get a loan at a rate that will likely never give you a desire or need to refinance.  And if you’re one of the few people who didn’t refinance over the last year or two the opportunity to be in the low 4′s can’t be passed up.  

So why aren’t we seeing huge amounts of activity in both purchase and refinance lending?  For refinances there are still home owners that unfortunately have not been able to take advantage of these rates because they are upside down or don’t have employment/income necessary to do so.  The creation of the Home Affordable Refinance Program allows some borrowers to get a loan if they are upside down although it has limitations and not every home owner can qualify.  Unfortunately the people it was mostly created to help sometimes don’t qualify because their loan isn’t backed by Freddie Mac or Fannie Mae or they are upside down more than is allowed by the program, have a non-conventional jumbo loan or perhaps they have no current employment.  There are some reasons why people don’t qualify but it’s in every home owners best interest to double check and make sure they aren’t missing out on an opportunity.

As the tax rebate program reached it’s end there wasn’t a huge glut of purchase activity due to many buyers jumping on the program when it first was set to end in fall of 2009.  There also has been a  lack of purchase activity due to the overall economic and employment conditions we’re all faced with.  Many people would like to buy a home but are concerned about their employment or income and it’s much easier to get out of a rental than face foreclosure.  There’s also the difficulties buyers face in getting financing these days.  Loan programs are much more stringent in terms of credit scores, documentation of income and qualifying debt to income ratios.  Many first time home buyers will need to put at least 3.5% down on an FHA Loan program which offers the lowest down payment option available to most borrowers.  That 3.5% of a purchase price in our metro area can represent a huge amount of money which most borrowers, if they have it, want to keep in reserve  these days.  The lack of first time buyers affects the repeat home buyers who need someone to buy their house in order to purchase another.   So despite these amazingly low interest rates, the level of purchases isn’t likely to explode due to all of the combined factors.   That being said, for those people who want to buy a home now, have decent credit, documentable income and the ability to make a down payment there are home loan rates unlike those we’ve ever seen before.

Michael Pollock is an Accredited Buyers Representative with EXP Realty and  Licensed Loan Originator with Northwest Home Center