Commercial PropertyRealty Viewpoint: Feds Unclog Mortgage Drain
The Office of Federal Housing Enterprise Oversight (OFHEO), Fannie Mae and Freddie Mac have agreed to a $200 billion bottle of Drano that will help to unclog the gunk clogging lending pipelines, but will it be enough to save the spring selling season?
It could if the GSEs can buy higher-limit loans in concert with loans going to consumers at lower interest rates.
Right now, that"s possible. If you are a buyer or have a client who is a buyer, now is the time to lock in a rate, and go shopping for a home.
But keep in mind that your mortgage lender can"t lock in your rate unless you"ve applied for a mortgage. That means that you"ve selected a lender, provided certain information so that the lender can pull your credit report and credit score, and that the lender has gotten back to you with your lock-in and APR rate.
Your rate is good for 30 days usually, and you can pay points to get the lock extended if you haven"t started shopping for a home yet.
Now I know what you"re thinking. Rates have swung wildly in the last few days, and you might like to hold off so you can catch rates down another quarter point or so. But there"s a risk in doing that.
But there"s a risk in doing that. You could get a lower rate, or rates may do the opposite and go up.
Right now, nobody knows what they will do. Veteran mortgage lenders like our own David Reed say they have never seen an interest rate environment like this before.
Reed advises that in times of such uncertainty, investors who want their money to work for them place it in bonds; and now that the Fed and OFHEO have come to the aid of conventional mortgages, we could see rates drift lower.
It"s up to you if you want to take the chance.
One advantage to locking is that it puts you in decision mode. You"re ready to buy and can move on to choosing the right property. If you don"t lock, you could put off buying indefinitely, and miss out on the highest inventory of homes we"ve had in years.
To buy a home, you have three major points to consider -- price, interest rate, and housing availability.
If you can get all three at their best levels, you"ve likely made the deal of your life.