Are you one step ahead of the Fed?

With the Federal Reserve no longer buying mortgage-backed securities, rates are expected to rise.

The Federal Reserve has stopped buying mortgage-backed securities from Fannie Mae and Freddie Mac and is now returning control of interest rates to private investors. Amazingly, the Fed has purchased a whopping $1.25 trillion worth of mortgage-backed securities since the beginning of last year.

Now that the Fed is slowly backing out of the picture, many analysts believe mortgage rates will jump to 6% or so by year end from 5% in recent weeks, while others predict only a slight increase. But the truth of the matter is that what happens to interest rates over the rest of this year depends on many factors that are hard to predict, including the strength of the economy, Fed policies and foreign investors’ willingness to buy U.S. debt.

So what does this mean for you, the home owner?
If you’re a home owner who is looking to refinance or otherwise modify your loan, consult with our mortgage specialists soon and consider locking your rate. A rate lock will ensure that the rate provided when you begin the application process for the modification to your loan is guaranteed for a specific period of time (typically 30 days) while you complete the process. This protects you from over-paying for your mortgage should rates or costs increase during that time.

So what does this mean for you, the home buyer?
Just like the home owners who are looking to refinance or modify their loan, home buyers are in a frenzy to take advantage of the rates before they rise. If you’re in the market for a new home, be sure to contact our mortgage specialists first to ensure you’re pre-qualified and pre-approved for a home loan.

Those home buyers who are pre-approved will have, in hand, a conditional commitment from their mortgage professional for an exact loan amount, which will allow them to shop the homes that fit their price range. This also provides the buyer with a bit of bargaining power, as the potential seller is able to see that he/she means business and is ready to buy.

Meanwhile, federal tax credits available for some home buyers are due to expire at the end of April, adding to that sense of urgency buyers may be feeling. Sales are likely to spike throughout the rest of the month as house hunters move quickly to take advantage of the $8,000 tax credit for first-time buyers and $6,500 for move-up buyers.

Need to talk to a mortgage specialist now? Call 866-245-0946!