Why Wait To Buy or Refinance?
The Fed's been at it again, offering words that sound encouraging at first blush, confirming that their buying program of Mortgage Backed Securities is in full swing and will continue as needed. Of course, the media will pick this up and offer their own interpretation, saying "Good news, the Fed's words on continuing their purchasing program mean that rates will continue to drop lower, and remain low into the summer..." In addition there is talk by the Republicans to add a plan to the current stimulus package on the table that will lower mortgage rates. With all this good news on rates going lower, everyone should wait to purchase a home or refinance. Not so.
Here's the truth.
Stay with me here...
With rates at present low levels, many of the mortgages in these FNMA 5.5% pools being bought up by the Fed will be refinanced and paid, thus giving the Fed a quick recoup on some of their investment. And this is likely a big reason why the Fed said they could continue this purchasing program beyond June, if necessary. Bottom line, the Fed buying these higher rate coupons will not necessarily help rates to move lower, as their actions do not impact the loans being originated at today's low rates.
But what if the government lowers rates to 4.5%.....
That is just what it is...an "if". It may happen, it may not. If it does, will you be able to capture that rate? Maybe, maybe not. There is already talk about it being limited to lower income borrowers with lower loan amounts. What if it doesn't happen? More than likely rates will be higher than today.
Here's the most important part.
Do you make your decision to buy based on what you know now or what you hope will happen in the near future? Sure, waiting could save you another $30 per month with a lower rate than where we stand presently. However, rates could turn higher and this window of opportunity could pass you by entirely. If you are considering a refinance, understand the savings offered right now by a refinance are what you know; waiting could eat into those savings everyday. Missing out on even $20 a month could cost you $7,200 over 30 years.
The clincher is this:
Rates are extremely attractive and very low. Yes, you hate to get a rate of 5.25% when you could have received 4.5%. But I do believe you would be even more irritated if you wait until late Spring or early Summer and obtain a rate of 6.00% when you could have had 5.25%. Amazing rates, excellent pricing and an inventory we haven't seen in years. I still say this is the best time to buy!
