As has been the case all year long, mortgage rates remain low – hovering the 5% mark. The tax credit extension, although the long term effects may be adverse, should help housing going into the first quarter of 2010. Coupled with low interest rates, many homebuyers may never again see such an opportunity. The big question is how long will mortgage rates be able to sustain these low levels. With the Feds pulling out of purchasing mortgage bonds by year end, interest rates are destined to ascend. Falling demand pushes prices lower and as we all know, as bond prices fall, interest rates rise. There is little chance that the Feds will begin to increase interest rates in the short term, but remember, the Feds monetary policy and interest rate adjustments, do not directly coincide with mortgage rates.
The bond chart represents mortgage back securities ( FNMA 4.5% bond ) prices over the last 6 months. Remember, falling bond prices indicate upward pressure on mortgage interest rates. The converse is also true – rising bond prices result in falling interest rates.
your graph runs into your “widget” on the right side – and I can’t quite get your graph. Interest rates are good, though, I agree. What kind of loan is best for first time buyer – an FHA or conventional?
@Elias, FHA loan rates are slightly higher due to the added risk to the lender, but the down payment requirements are less. Also, if you need some fix-it-up cash, FHA is the way to go with a 401k re-hab loan.
@Elias, The “best” program will be dependent on your unique needs and goals as you purchase a home for the first time. As mmeads mentioned, FHA is more flexible in regards to down payment with a minimum requirement of 3.5%. FHA loans are also more flexible when it comes to credit scores and will currently allow someone with a score as low as 620 to qualify for a low interest rate. On the other hand, if someone is prepared to put 20% down and has great credit, a conventional loan would likely be best. In this case, the conventional loan would have a better interest rate and would not have a monthly mortgage insurance payment. My suggestion would be to interview a mortgage planner to find out if they are a good fit for you. From that point they can help you become pre-qualified for the best program, whether that be FHA or Conventional.