Home loan interest rates are moving upward again after a recent two-year low. In addition, there are increases in mortgage-insurance costs, tougher requirements on down payments and other moves by lenders to restrict credit. Last month, as Liz reported on November 26, Fannie Mae and Freddie Mac imposed surcharges for home loan borrowers with lower credit scores. Now, higher costs will be imposed on mortgage loans even for those with excellent credit. This means: Lock now and buy before March 9, 2008 if you need a home loan to make the purchase. Even if home prices drop a bit further, the mortgage costs could mean you won’t have a net gain if you wait any longer to buy a home. The Wall Street Journal reported this morning that Fannie Mae, the giant government-sponsored mortgage investor, last week raised costs for many borrowers by quietly adding a 0.25% up-front charge on all new mortgages that it buys or guarantees. On a $400,000 mortgage, that means an extra $1,000 in fees. Freddie Mac, the other big government-sponsored mortgage investor, was expected to impose a similar fee soon, according to the article. Indeed, at 11:03 EST this a.m., Freddie made the announcement – new fees for both Freddie and Fannie will go into effect for all closings starting March 9, 2008. The fees are designed to recoup losses from defaults on existing mortgages. Taking the long view (as you should when buying a home), home loan rates now are low and should not inhibit buyers. Indeed, home buyers should act now rather than expecting lower rates later in 2008. Rates are most likely to slope upward over the course of next year rather than down. And now we know that as of March 9, closing costs will rise. People with good credit scores and enough savings to pay a substantial down payment can still get 30-year fixed-rate mortgages of as much as $417,000 for 6.14% on average, according to HSH Associates, a financial-publishing firm in Pompton Plains, N.J., as reported in the WSJ article. Jumbo loans, however, have become more expensive relative to smaller loans. These are loans over $417,000 and are not available form Fannie Mae or Freddie Mac. The expense of these loans has depressed home prices generally in the Western Region of the country because home prices have been higher here. The greater expense of jumbo loans also affects the Flagstaff market, where many homes are in the higher price ranges. Expect those prices to continue at a depressed level for the next several months. Today’s message: Lock now. Buy now. |
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