Mortgage Money Will Be Cheap!

Interest rates will remain at historic lows and money will be abundantly available to those who can afford to borrow it. The problem is lending requirements have become so strict that fewer borrowers fit today's bank guidelines. To get a loan, a borrower's FICO score needs to be above 620 for FHA and 720 for conventional. Banks order FICO scores from 3 credit reporting agencies and use the middle score. To stimulate the real estate market, the Feds are likely to keep interest rates in check throughout 2011.

2011 REAL ESTATE PREDICTIONS

Freddie Mac analysts point to five features that they believe will likely characterize the 2011 housing and mortgage markets:


1. Low mortgage rates. With Fed observers expecting the central bank to keep the federal funds rate at its current target range of 0 percent to 0.25 percent for most (or all) of 2011, relatively low mortgage rates will be a feature of the 2011 mortgage market.

2. Prices have hit bottom. House prices are likely to begin a gradual, but sustained recovery in the second half of 2011.

3. Housing will remain affordable. With affordability high, many first-time buyers will be attracted to the housing market in the New Year, likely translating into more home sales in 2011 than in 2010.

4. Refinances will dwindle. Many eligible borrowers have already refinanced and the federal Making Home Affordable refinance program is expiring on June 30. While fixed-rate loans are likely to remain low, they will move up gradually, making it even less likely that refinances will be attractive to most home owners.

5. Delinquency rates will decline. Based on the last several business cycles, the share of loans that are 90 or more days delinquent or in foreclosure proceedings - known as the "seriously delinquent rate" - generally crests within a year of the start of the recovery in payroll employment, and this economic recovery appears to fit within that pattern. Payrolls began to rise last January, and by the spring the seriously delinquent rate had begun to fall.

Source: Freddie Mac (12/09/2010)

CAN YOU STILL GET A 5% MORTGAGE?

Here's What aRecent CNNMoney.com Article
Had to Say . . .

Since November 2008 the Federal Reserve has snapped up $1.25 trillion worth of mortgage-backed securities -- essentially, people's mortgages bundled together and sold to investors. When the Fed stops buying and cedes the playing field to private investors, they will almost surely demand better return for their risk. The Fed said it will taper off [purchases] gradually. Each week they buy less than the week before.
So far, though, the tapering has failed to spawn higher rates. Still, all of the experts agree that mortgage rates will climb. The good news is that none of them think the increase will be very large. Their projections are for a gradual run up to between 5.5% and 6% by December. That will add only about $70 to the monthly payment on a $150,000 note. That's still very reasonable and should not discourage many consumers.
Homebuyers may even find themselves paying less every month as housing markets continue to experience price declines. Industry experts are projecting further home price drops of 5% to 10%. Which would wipe out every bit, and more, of the monthly payment increases higher mortgage rates would bring.
CNN Money Article

INTEREST RATES HAVE NOWHERE TO GO BUT UP!

Even as prospects for the American economy brighten, consumers are about to face a new financial burden: a sustained period of rising interest rates.

This fact, economists say, is the inevitable outcome of the nation's ballooning debt and the renewed prospect of more inflation as the economy recovers from the depths of the recent recession.

The shift is sure to come as a shock to consumers whose spending habits were shaped by a historic 30-year decline in the cost of borrowing.
The impact of higher rates is likely to be felt first in the housing market, which has only recently begun to rebound from a deep slump. The rate for a 30-year fixed rate mortgage has risen half a point since December, hitting 5.31 in April, the highest level since last summer. Along with the sell-off in bonds, the Federal Reserve has halted its emergency $1.25 trillion program to buy mortgage debt, placing even more upward pressure on rates.

The Mortgage Bankers Association expects the rise to continue, with the 30-year mortgage rate going to 5.5 percent by late summer and as high as 6 % by the end of the year.

For young home buyers today considering 30-year mortgages with a rate of just over 5 %, it might be hard to conceive of a time like October 1981, when mortgage rates reached a peak at 18.2 %t. Therefore, this meant monthly payments of $1,523 then compared with $556 now for a $100,000 loan.

No one expects rates to return to anything resembling 1981 levels. Still, for much of Wall Street, the question is not whether rates will go up, but rather by how much. For the complete article see: Complete NY Times Article