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5 Questions to Consider Before Purchasing a Home By Mary Ellen Podmolik December 15, 2009—(MCT)—Interest rates on the benchmark 30-year, fixed-rate mortgage dipped to a 38-year low recently, giving consumers another reason to consider purchasing a home or refinancing their current one. Freddie Mac recently stated the average rate on a 30-year loan was 4.71% with an average 0.7 point, the lowest rate since the agency began its weekly tracking of long-term interest rates in 1971. A point is equal to 1% of the loan amount, payable as a lump sum at closing. While the decline wasn’t overly dramatic, the dip is likely to get people wondering whether it’s time to sign on the dotted line. The 5 following questions may help you decide if now is the time to go ahead and purchase a home or refinance your current home. Q: Why are rates so low? Q: Are rates expected stay this low? In a recently published mortgage survey, more than 60% of Bankrate.com’s panel of experts predicted that rates will move higher over the next 30 to 45 days. How much higher is anyone’s guess. Last year at this time, the average 30-year, fixed-rate mortgage was 5.53%. Q: Why do different mortgage surveys come up with different average interest rates? But regardless of the survey, the general consensus is that rates are ultra-low right now and may be the lowest the market will see. Q: What else does a consumer need to know? If you’re refinancing, remember the bigger the loan, the greater the payoff for finding a lower interest rate. Savvy customers put in their paperwork with a lender and set a “strike” interest rate at which to lock in the loan, a good move considering rate volatility. Several refinancing calculators are available online that let borrowers plug in all the required numbers and determine the monthly savings and how long it will take to recoup the expense of a refinancing. Q: So is now the best time to buy a home? On the flip side, there’s growing sentiment among analysts that housing prices, which are showing ever-so-minor improvement, may fall further. The reason? Lenders are expected to get better at determining which borrowers will qualify for loan modifications. That means lenders also will get faster at moving homes through the foreclosure process. |
