September was an exciting time. The kids were back in school. A hint of crisp weather was in the air. A plan was afoot within the government to purchase "toxic" mortgage-backed securities from Freddie Mac and Fannie Mae. Life was good.
The problem was, after Congress approved TARP (the Troubled Asset Relief Plan), the Fed changed its mind and went to bail out banks instead of the mortgage market. It seemed back to square one for anyone involved in the mortgage industry, whether as a professional or a consumer.
But have no fear, faithful readers, good news is afoot yet again! Last week, Henry Paulson approved another plan, very similar to the first, the aim of which is to help detox the poisoned environment of the mortgage market. Mortgage rates went a lot lower, allowing many people to refinance into better loans.
Rates are still good over a week later. Some reports are even surfacing of 30-year fixed mortgages available on purchase loans (not refinances) for 4.5%. These rates may even be available for jumbo loans (which are necessary in many areas of Southern California).
With all this good news, there is an inherent danger afoot: the desire to continue waiting for rates to drop even further. Many borrowers will decide that if rates are decreasing now, they will continue to decrease and it will be advantageous to wait it out. The problem is that the plan that would bring about these lower rates has not yet solidified, and many changes could still occur that could cause rates to change dramatically. Also, there's no guarantee that the change would be in favor of borrowers - rates might actually increase.
As always, our advice is to contact a trusted mortgage professional (like us!) whose job is to read the markets so as to best advise their clients for their individual situations. If you are considering a new home loan or changing an existing loan, please call us first to make sure your next move is the best one available.
Find out more about us on our website: www.januaryfinancial.com
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