An Online Home Buying Network For Educators
Possible 4.5% Mortgage Rates On The Way
Today it was reported by anonymous sources that Treasury Secretary Henry Paulson is considering purchasing many more mortgage backed securities issued by Fannie Mae and Freddie Mac that would be used to press the mortgage interest rates down to 4.5%.
Apparently, this would only be for new loans and not intended for refinancing. What could this mean for the depressed housing market. We will look at an example.
Presently the rate is approximately 5.75% for a 30 year conventional loan. For a $200,000 mortgage the payment would be $1,167.15. At 4.5% as proposed on the same loan the payment would be $1,013.37 which would save the new homeowner $153.78 per month. This lowered rate would allow many buyers to qualify for a larger home at a lower payment. Analysts today predicted this could result in anywhere from 500,000 to several million more home sales. Although this new lower rate would not help save people from foreclosure, if it is true that it could not be used to refinance existing loans it would result in more foreclosed homes to sell, and would likely result in stabilization in prices.
At the same time the FDIC is proposing rewriting existing loans for those that pay more than 31% of their income toward a home loan. This could help reduce the number of foreclosures while the lower rate would likely result in a good increase in sales.
Apparently, this would only be for new loans and not intended for refinancing. What could this mean for the depressed housing market. We will look at an example.
Presently the rate is approximately 5.75% for a 30 year conventional loan. For a $200,000 mortgage the payment would be $1,167.15. At 4.5% as proposed on the same loan the payment would be $1,013.37 which would save the new homeowner $153.78 per month. This lowered rate would allow many buyers to qualify for a larger home at a lower payment. Analysts today predicted this could result in anywhere from 500,000 to several million more home sales. Although this new lower rate would not help save people from foreclosure, if it is true that it could not be used to refinance existing loans it would result in more foreclosed homes to sell, and would likely result in stabilization in prices.
At the same time the FDIC is proposing rewriting existing loans for those that pay more than 31% of their income toward a home loan. This could help reduce the number of foreclosures while the lower rate would likely result in a good increase in sales.
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Comment by Troy Schuricht on December 5, 2008 at 9:20am - Great information. My fingers are crossed.
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