With Mortgage Rates Low in 2011, what’s in Store of the Home Buyer?

Low Rates = Low Payments = No Need For Cash Advance Loans 🙂

We are witnessing one of the historic lows in mortgage rates since the past November which was the lowest in four decades. So, if you are buying a house over a 30 year period on fixed mortgage, you can expect a rate as low as 4.63 percent while if you are buying a 15 year mortgage, it can be as low as just 3. 82 percent.

In spite of mortgage rates being low, the general mood among people is low because they believe that the rate may go down further. Also things like the credit crunch situation, the state of economy, the erratic job market, foreclosures and higher down payment requirements are threatening to play spoilsport as well.

Many first time buyers are still not really interested in the lows mortgage rates for two reasons: one, because they believe that the mortgage rate should still go down in the next few months and the second, not being able to qualify for the mortgage. Freddie Mac and Fannie Mae, who are government-run mortgage buyers, back 90 percent of new loans. Their condition is that the credit rating of a person who wants to buy a house should be 760, forty points more than what it was in 2007. Less than 50 percent of adult Americans barely manage to touch 760.

Banks also ask for higher down payments, the median rate rose to 22 percent in 2010 across 9 major cities in the US, which is 4 percent more than 2006. In short, if you have a higher financial reserve, banks are like to hand out loans or they do not really welcome buyers. In a pressurized economical situation that the country is going through, there are not enough buyers who can come up with a 20-25 percent down payment.

Ten years ago, home ownership was looked upon as a safe investment by about 83 percent of the populace but now only 66.66 percent people feel that way. The main dilemma now is that people are wondering if the mortgage rates will go down further. For instance, there were speculations in the beginning that the mortgage rates will rise but the opposite came true. So, those who can afford to buy still are passing it, thinking that the rates should plummet. As you know, even a fraction of a few percentage points can make a lot of difference to the rate at which house can be bought.

So what do we make of all this? The Mortgage Bankers Association (MBA) has said that the mortgage rates may rise to 6 percent in 2012. By the end of 2010, the rates moved out of 4 percent range and went to slightly above 5 percent. Historically speaking a 5 percent mortgage is still considered historically low. So, if the rate is 4. 63 percent for a 30 year fixed mortgage, it is better to avail of it. The rest is up to your personal inclination as to what time you’d like to buy a house.