YOUR DREAM HOME IS CLOSER THAN YOU THINK

When thinking about buying a home there are so many factors to consider.   Not only are you looking for your ideal space but you also need to know that you can afford the costs of owning a home.   As the market tries to even out, our economy continues to show record-level mortgage rates.

Just recently Freddie Mac stated that the average rate on a 30-year loan was 4.71% with an average 0.7 point.   This is a 38-year low and the lowest rate since Freddie began tracking long-term interest rates in 1971.

This latest news gives owners a good reason to consider refinancing their current home or those in a position to buy to think hard before turning away from what continues to be a solid, long-term investment.

Of course, with any major financial decision it makes sense to consult with your financial advisor.   In the interim here are five questions to guage before purchasing a home.

1.   Why are rates so low?

Since early January the Federal Reserve has been purchasing mortgage-backed securities trying to stabilize the housing market.   The program manager, Federal Reserve Bank of New York, anticipates purchasing $1.25 trillion of the securities which are backed by Freddie Mac, Fannie Mae and Ginnie May.

2. Are rates expected to stay this low?

Now where did I put my crystal ball?   You can never guarantee what will happen within the lending landscape.   The Fed plans to end its purchasing program in March 2010, which is causing concern in the mortgage industry.

At this time last year the average fixed-rate, 30-year mortgage was 5.53%.   Almost two-thirds of Bankrate.com‘s panel experts foresee a rise in mortgage rates over the next 30 to 45 days.

3.   Why do different mortgage surveys come up with different average rates?

There are several reasons to take into consideration when asking this question.   First, which lenders were in the sample taken?   Second, which rates were quoted?   Posted rates?   Application rates?   Commitment rates?   Finally, did the survey take points paid to secure the rate into account?   Regardless the answers or survey, the overall consensus is that rates are extremely low and may start rebounding in the near future.

4.   What else should the consumer know?

Your credit-worthiness and ability to make a sizable down payment will garner you the lowest rates.   However, don’t let the rates be your only guide.   Be certain to investigate the fees required, which can vary from lender to lender.

Refinancing is a benefit any current home owner should deliberate especially if you would be lowering your interest rate.   More savvy customers are proposing a “strike” interest rate with their lender and submitting paperwork now to allow the lender to lock in the loan.   With the volatility of the market this is a great strategy especially if you have a large loan on your home.

5.   Is now the best time to buy a home?

Your personal circumstances will dictate this answer.   The favorable indicators include low interest rates, plenty of marked-down homes for sale and an expanded and extended federal tax credit that expires in the spring.

Conversely, analysts think that home prices may fall further.   With the influx of more foreclosures and lenders getting better at determining loan modifications, the process is sure to get faster than current trends.

Moody’s Economy.com chief economist, Mark Zandi, recently predicted the housing market to hit bottom in the third quarter of 2010. Essentially, this means that anyone buying a house now could see the value of their investment initially depreciate.   On the flip side, if you continue to wait you could lose out on the known value in mortgage rates and the federal tax credit.

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