If you are considering house hunting, is now the time to get a good mortgage deal?
With recent news headlines on the government proposal for a breakup of Fannie Mae and Freddie Mac, it may indeed be the best time to get in on the good rates.
Fannie Mae was established in 1938 to raise the number of homeowners. In 1970, Freddie Mac was started, essentially to divide the pie by removing the monopoly.
Fannie and Freddie are the two largest government-sponsored enterprises (GSEs) for residential mortgages. According to a National Public Radio report, about 90 percent of all new mortgages in this country are funded by the Federal Housing Administration (FHA) or by the GSEs.
The proposal suggests a five to seven year time frame for the entire plan, if it passes Congress, to be put in place gradually. It has defined three options: a) private lenders and banking are responsible for mortgage business; b) limited help and government security if another financial crisis occurs; and c) more government oversight of the mortgage industry.
So how might a breakup of these organizations affect you? Here are a few key pieces consumers should pay attention to and consider when buying a house now:
First: Potential higher borrowing costs with limited financing choices.
Second: 30-year fixed-rate mortgage may ultimately disappear, or at a minimum become hard to find. Traditional banks typically don't want this type of long-term, low interest loan on the balance sheet. Without Freddie and Fannie around to buy them, banks will not want to extend the credit.
Third: Limited role for FHA which requires low down payments. FHA will loan to first-time buyers, those with weak credit, or those in a low income bracket.
Fourth: Lowering loan size that can be insured by Freddie or Fannie.
Fifth: For loans from FHA, Fannie or Freddie, raising the minimum down payment from 3.5 percent to 10% and increasing the percentage on the mortgage insurance premiums can be done without Congressional approval. Thus consumers can expect to see this happen soon.
The Fannie and Freddie proposal carries a great deal more than just these points. The Consumer Federation of America director Barry Zigas says the breakup process is uncertain, but consumers will likely find better deals on the fixed-rate loans if they look sooner rather than later.
Yes, now is a great time to house shop and find a good mortgage rate.
If I can help you with finding your perfect home in Blanchard, Norman, Edmond, Shawnee, or Oklahoma City, please contact me online, give me a call at 405-366-1111 or check out my website.
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