Saturday, January 03, 2009

Mortgages: 4.5% Interest Rate in Chicago?

Guest blogger Brian Cumpton, Loan officer with Wells Fargo RWF Home Mortgage, sent me this synopsis early last week of the reality of the 4.5% interest rate for mortgage financing.

My Loan Toolbox information service provided me a great piece for where Mortgage Rates are going – which they have trended downward here in Chicago the past few weeks. Below is a snap shot of what is going on provided by Loan Toolbox:

"While the mortgage market continues to generate a lot of chatter in both the media and in Washington, interest rates are currently near or at all-time lows here in Chicago. Lately there has been talk about the 4.5% 30-year fixed rate mortgage. Will it become a reality though? Right now, no one really knows. Homeowners who could benefit from a lower interest rate need to know that even if 4.5% becomes a reality from Washington's actions, it would only be available to home buyers, not homeowners seeking to better their rate. If you need to refinance, you will be left out."

"You also may have heard about Hope for Homeowners, which is a program approved by legislators to help distressed homeowners. However, regardless of its best intentions, the program has not been embraced by investors, and it is not available to many it could help. The bottom line is, the Fed announced recently that they are going to buy up to $600 billion in mortgage-backed securities. This has already driven rates to historical lows. In January, the SEC is meeting and information may be released that could have a significant bearing on rates, potentially for the worse."

"Waiting to obtain the best rate is only possible for those with loan applications already in process. Interest rates are incredibly volatile and fluctuations that used to take months are now occurring in just days or even hours. If you don't have an application in process, you could lose out. We are already seeing lender backlog due to low interest rates. In 2003, with rates at these same low levels, we saw some lenders taking up to 90 days to close a loan. Home loan rates are currently in the mid- to low-5% range. Home values are currently at 2003-2004 levels, coming down significantly from their high point. "

With low rates, low prices and a first time home buyer tax credit of up to $7,500 from the federal government the conditions can be favorable and affordable to purchase a home.


Anonymous said...

4.5% seems good, but still, i have the feeling that we (ok, you in the USA, but I think our countries are quite bounded...) are trying to solve mistakes done in years 2002-2007 by administrative precautions. The problem is homeowners' income/property value and the level of their mortgage simply don't match. FED may try to cut the rates and to help them, but low rates are just short term solution, because extremely low interest rate will cause another distortions....
Take care

Eric Rojas said...

I agree and I think the story issues here goes into who it will help and who it won't. But here in Chicago where in many of the desirable neighborhoods prices have been more stable than the rest of the country, it will give first time buyers and those moving here more opportunity to clear inventory.
The cheaper interest rate will help the "move-up" condo seller at least sell their place because now a buyer afford a nice location. Than, the seller can buy a house that's sitting empty that they could not have afforded three years ago.

The rate will not help those who just can not sell because they are so far up-side-down.

It will also help first time buyers get a better property for a lower price. Many single family homeowners in Chicago own their homes outright or have a low mortgage. Many are retiring. The rate will help move these homes and provide stable, young family homeowners again. The way it should be!