Smart home buyers are focusing on taking advantage of the present, very favorable rate situation along with the still available tax credit.
Rates are likely to go up:
Please note that the main reason interest rates are so low is because the government is buying mortgage backed securities, or you may have heard the term “toxic assets”, which are basically sub-prime loans or loans that required no proof of income, allowed low credit scores and were generally 0% down.
After you get a loan through your bank or mortgage broker, the loans are sold to Fannie Mae and Freddie Mac and then those 2 entities package them up to sell them to investors. After the sub-prime meltdown no investors wanted them and so to keep Freddie Mac and Fannie Mae afloat, we, as taxpayers, bought them for essentially the “list price” even though they were not worth anything.
Even now, because interest rates are so low, private investors are not interested in mortgage backed securities (even though most of the loans now have a stringent qualification process) and so we, as taxpayers, are still buying them (and probably over-paying the banks).
In December (on the 24th, while most of the country was spending time at home with their family for the holidays) the Treasury announced there was to be no limit on what the government spent to bail out Freddie Mac and Fannie Mae. The prior limit was 400 Billion. This is a good article to explain what that means (besides we are all getting ripped off and our children, children’s children and so on will suffer). http://www.huffingtonpost.com/dean-baker/fannie-mae-and-freddie-ma_b_405117.html .
So, when the government decides to start stepping out of the big business welfare role, interest rates will go up and I presume that will happen in 2010 sometime. So, what happens when interest rates increase? Buyer’s qualify for less money and it impacts the housing market because buyers can afford less.
Tax Credit for First-time Buyers and Move-up Buyers scheduled to expire April 30, 2010.
In order to qualify for the credit, all home purchase contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.
More about these tax credits can be learned in one of our prior posts from November 8, 2009 entitled “First Time Homebuyer Tax Credit Extended” and “A New Tax Credit for Certain Existing Home Owners”.
A great way to learn more about the above topics or decide if becoming a homeowner is right for you, please contact us or attend one of our home buyer workshops:
UPCOMING HOME BUYER WORKSHOPS
|Date:||Thursday, January 28, 2010|
|Time:||6:30pm – 7:30pm|
|Location:||Northgate (Seattle) – 9709 3rd Ave NE #450, Seattle, WA 98115|
Loan Application Process, First-time Homebuyer Tax Credit, Market Conditions, Own vs. Rent Illustration, Home Buying Process, For Sale by Owner (FSBO), bank-owned, short-sale properties, Q & A. RSVP to Kerstin at 206.276.5827 or email@example.com
Krisanne Heinze & Kerstin G. Brooks