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Diane Gallagher

Is now the time to buy? Are interest rates at the lowest?

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Posted: Friday, June 29, 2012 1:19 pm

According to many economists, they are forecasting that mortgage rates will rise again later this year as the American economy gradually improves and as more global investors turn to the U.S. as a safe haven for money. Mortgage rates tend to fall when there are concerns about the economy,” said Jed Kolko, the chief economist for Trulia.

Although rates inched up this past week, home buyers and refinancers may be wondering how low rates can go — and how they can capture the best rates now.

The average rate on a 30-year fixed-rate mortgage averaged 3.71 percent the week of June 14.

The rate had averaged 3.9 percent three months earlier and 4.5 percent a year earlier.

Kolko also added that rates are at historic lows, borrowers need to understand that the advertised rates are generally for those with the best credit. “If your credit is in the mid-600s instead of the mid-700s, that could be as much as an extra percentage point on your mortgage rate.”

Those planning to refinance or buy a home in the next two or three months might want to consider locking in a mortgage rate now.

Borrowers with rate locks, with a built-in deadline, often receive priority treatment from lenders, because the borrower is telling the lender that he or she is serious about closing soon.

Lock-in costs and policies vary widely, and are based partly on the time frame the borrower wants covered. Most borrowers will need a 60- to 90-day lock.

If interest rates continue to fall during the lock period, borrowers can ask the lender to rewrite the rate lock at an additional cost, or obtain a “float-down” provision in the original agreement. A lock with a float-down agreement allows the borrower to change the rate, often only once, before closing on the mortgage. This option is generally more expensive than a standard lock.

It’s really tough for rates to go much lower,” said Cristian de Ritis, the director of Moody’s Analytics. “It’s almost unbelievable that you can get a 30-year mortgage at that rate.” Mr. de Ritis said that rates could possibly fall further, perhaps as much as a quarter of a percentage point, but he added that it was more likely that they would start “a slow drift” upward. In six months, the rate on the 30-year fixed-rate mortgage could be at 3.8 to 3.9 percent, he predicted, and a year from now, 4.1 to 4.2 percent.

“If the economy does recover more aggressively than what we think, or what investors think,” he said, “then the Fed will likely raise rates.” The next two Federal Reserve Open Market meetings, which determine credit policy, are scheduled for June 19 and 20 and July 31 and Aug. 1.

Hopefully this will help you make a decision whether to purchase now or later. Contact your local Realtor to see what’s available for you today.

Diane Gallagher is the president of the Lodi Association of Realtors and can be reached at larpres2012@yahoo.com

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