Home Buying in Indianapolis>Question Details

Mike, Home Buyer in Indianapolis, IN

I'm reading alot about this Fannie May fall out story. When are rates for homebuyers going to increase, and?

Asked by Mike, Indianapolis, IN Fri Jul 11, 2008

by how much do you feel they will go up? I was just getting serious about getting a house, but it was mainly because the rates were so low. Anyone have any predicitons as to what will happen with the rates given this development, short and long term?

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When the rates go up, prices will be forced lower. On top of all that, there will be an estimated 2.5 million foreclosures next year. There was an estimated 1.5 million foreclosures this year (they're not all completed, If i remember corrrectly the banks have only taken back 600,000 properties from homeowners this year).
3 votes Thank Flag Link Fri Jul 11, 2008
I walked into a home with one of my buyers, carrying the preapproval for a 6.875% mtg. We wrote an offer, I phoned their lender and she told me the rate had just dropped to 6.0% for them. If you are getting serious, Mike, this is a good time to move. However, if you need pmi, get in a hurry, because FHA is
changing pmi rates and that will make a difference as to how much home you can have. When money
gets tighter, rates get higher. Get in contact with your lender and get into available homes with your agent. Another force to reckon on: With oil prices so high and the cost of consumer goods going up, the FED begins to worry about inflation. They are talking about it now and watching the markets. When the FED believes they see inflationary forces at work, they raise interest rates. No one can really predict the future, but we know rates are good now. If you don't have a lender, I can give you one that can explain all this in detail.
1 vote Thank Flag Link Sun Jul 13, 2008
just remember that the people running these institutions into the ground are making millions of dollars a year in salaries and bonuses
1 vote Thank Flag Link Fri Jul 11, 2008
Reality is anyones guess, the Fed will likely bail out both entities. Which will mean John Q public's tax dollars. Essentially, your seeing unprecedented events, inflation! More money higher inflation, Mortgage lenders need Fannie and Freddie or who is going to buy the loans?
1 vote Thank Flag Link Fri Jul 11, 2008
Now is the best time, if you are thinking of buying a house, do it! Folks that have had their houses on the market all summer are ready to talk! Find an agent to represent you and get a move on. You will never find the absolutely "perfect" time, and if you wait for it, you will never buy a house. The rates come and go and the availability of ready money for loans also comes and goes. My first house, purchased 30 yrs ago with an FHA loan was 7.25% interest and 5 years later that rate was a BARGAIN, because rates then were in double digit territory.

I just wish you were living in this area, I love working with first time buyers! Good luck and happy house hunting!

Jody Jones
Century 21 Landmark Realty
Elkhart, IN
1 vote Thank Flag Link Fri Jul 11, 2008
Thanks for your question.
The Fannie thing is far away from today's rates. This week has been a roller coaster with some big cuts and hikes. Make sure you look at the entire finance package. Back in December and January rates were at a 43-year low. Today they are less than a point higher. If your looking for a home remember that it is a buyers market and rates are near historic low levels. What are you waiting for?

Let me know if I can help
Tony Grego - The Place for Great Rates!
0 votes Thank Flag Link Fri Jul 11, 2008
Lending answer:

Wall Street is concerned about Fannie/Freddie's balance sheets - not necessarily the ability to buy loans from banks.

Fannie/Freddie raise money two ways: 1.) Selling stock, just like any other corporation, to raise capital for operations and expansion and 2.) Selling bonds (MBSs) backed by pools of mortgage loans to raise money to buy mortgage loans from banks.

The main concern for borrowers is if Fannie/Freddie are viewed as financially troubled, buyers of their Mortgage Backed Securities many demand a higher yield (and corresponding interest rate on loans) to offset the risk of undercapitalization on their balance sheet.

It's likely Unclse Sam would step in with a cash injection long before investors in MBSs became leery of investing... but we may see interest rates rise back to the normal levels of 7.5%-9.25%... then again Uncle Sam might act there buy issuing guarantees directly (such as through FHA) or indirectly (such as through GinneMae) to make sure a rise in rates doesn't choke off the housing recovery.
0 votes Thank Flag Link Fri Jul 11, 2008
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