Home mortgages are continuing their trend of unbelievably low rates.
The question is, how long will they continue?
Mortgage rates continue to hover around 4 percent for a 30-year fixed rate.
However, if you plan on being in a home less than 10 years or expect to pay it off in 10 years or less, rates are averaging 3.5 percent for a 10/1 adjustable rate mortgage (ARM). A 10/1 means the rate is fixed for 10 years after which time it adjusts and the loan is amortized over 30 years.
Even more amazing, rates on a 7/1 ARM are below 3 percent. Rates vary depending on credit score and credit history.
Two recent developments will change the ability to borrow. First, rates are forecasted to rise due to President Obama and Congress passing a two-month extension to the reduced FICA (Social Security) tax. To pay for this, the government has imposed a fee on federally financed mortgages (FHA, Fannie Mae and Freddie Mac) that is forecasted to be approximately $180 a year on a $200,000 mortgage. This is equivalent to about a .1 percent increase in interest rates.
The Home Affordable Refinance Program (HARP2) was enacted in late 2011 and should be implemented by March 2012.
Without going into details, the original HARP program did not meet expectations. HARP2, if it works as planned, should eliminate some of the foreclosures and short sales on the market and also put more discretionary income in homeowners’ pockets.
HARP2 will allow underwater homeowners who have a mortgage backed by Fannie Mae or Freddie Mac to refinance at today’s interest rates.
To qualify, a homeowner must be current on their payments with no more than one missed payment in the last year and the current loan on the property must have been in place before May 31, 2009. Jumbo loans are not eligible.
No doubt, more rules and restrictions will be announced.
Check Fannie Mae and Freddie Mac Web sites to see if your mortgage is owned by either.
Ray Pugel is a designated broker with Coldwell Banker Bishop Realty. Contact him at (928) 474-2216.