EDMOND — Just this week there has been considerable buzz that the Fed will release $1.2 trillion in new money and use that money to purchase government bonds as well as mortgage-backed securities. I don’t know too many people who are thrilled that the government is printing money faster than Congress can figure out ways to spend it. And I know even fewer people who can accurately predict how such an infusion of cash ultimately will play out in our current real estate market.
The possible scenarios play out like this year’s Oscars. Some good, some bad, some mediocre and maybe one or two really good ones; but all of that depends on your perspectives of what’s best for the economy. I can promise you one thing, those of us in the business of financing homes will be busy answering one question, “What do you think home mortgage interest rates are going to do?”
By infusing this cash into bonds and mortgage-backed securities, the Fed intends to drive home mortgage rates lower and stimulate purchase activity in the nationwide glut of available home inventory. For hard-hit areas like Phoenix, Las Vegas, California and Florida this could provide just enough stimulus to not only stop the bleeding but also reverse the negative equity trend faced by these markets.
For our local area, the potential benefits of this housing stimulus could make for a brisk spring and summer home buying/refinancing season. The OKC metro area has not seen the same decline in property values. Most areas of the metro have seen home values remain steady or slightly improved during the past year. At the same time we have seen our available home inventory grow while potential home buyers take longer than usual to think over their options before making buying offers.
Low residential interest rates can be a powerful motivator for qualified home buyers to finally make the purchase decision they have been putting off. But all is not roses and Russell Stover’s. Lending guidelines have tightened significantly and buyers will have a bit of education awaiting them.
The only 100 percent financing options that remain are for veterans eligible for V.A. benefits and Rural Development Housing loans through the U.S. Department of Agriculture. Both of these financing options have specific borrower guidelines so consult your mortgage provider carefully to make certain you understand all restrictions.
F.H.A. home mortgages now require a minimum down payment of 3.5 percent plus closing costs. However, these costs can be provided as a gift from a qualifying relative. Again your mortgage provider will gladly review all of these conditions with you.
There will be a lot of talk about F.H.A. Streamline Refinances. If you already have an F.H.A. mortgage on your primary residence, you can more than likely take advantage of this refinancing option to lower your interest rate while saving quite a bit on your closing costs.
If your current home loan is a V.A., you also have a streamline refinance option. It is called the Interest Rate Reduction Refinance Loan and it is a great way for qualifying veterans to realize considerable savings on their monthly mortgage payments. This refinancing option also has lower closing costs associated with the process. There are, however, several conditions that must be met in order to qualify. Mostly the conditions are relative to the value of the home and the timeliness of past mortgage payments.
I shouldn’t forget to mention that should interest rates fall, this also will make Reverse Mortgages more attractive for seniors older than the age of 62. There are a great many myths circulating about Reverse Mortgages. But for many senior home owners a Reverse Mortgage can be a safe and secure way to supplement the income that has been lost in our current economy.
Will we see 4 percent rates? No one knows for sure. If you hear low rates advertised carefully read the fine print to make sure you’re not paying exorbitant fees that could potentially negate any anticipated benefit. To rob a phrase from classical literature, these could be the best of times in the midst of the worst of times. The wise person gathers information, thinks and prays about it, seeks counsel and then makes the best possible decision.
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