We have seen a steady decrease in the interest rates these past few weeks.  Today they hit the mid 4%'s --we haven't seen that for months!  Obviously credit and the homes value play significant roles today, but if you are wanting to take advantage of these great rates --call me at 425.503.8862 or send me an email at lgoulden@comcast.net

"BE WILLING TO MAKE DECISIONS." General George Patton. And that's exactly what the Fed did last week at their regularly scheduled Federal Open Market Committee meeting. But just what did they decide...and what do their decisions mean for home loan rates?

The Fed said they are going to ration out the remaining commitment of Mortgage Backed Security purchases through the first quarter of 2010. There will be no additional buying, but instead, a longer weaning off of the program. There was some speculation about the Fed increasing the amount of buying above the $1.25T committed to, and last week's statement is the Fed's nice way of saying "no." They will not be buying more in quantity, but what they will do is attempt to provide a smoother transition to normal market conditions.

It is a given that once the Fed ceases its purchases, that interest rates will climb significantly higher...most likely back above the 6% area. So instead of a hard transition with a large bump in rates, the Fed is attempting to allow rates to gradually rise. This means that waiting to purchase or refinance will very likely mean a higher interest rate.

Their decision also means that the Fed's remaining purchases will all be lower in quantity, as the remaining allotment for purchases will be spread over a longer period of time - and additionally, will not necessarily be spread out as evenly as their past purchases - which could lead to more volatility for rates in the near term.

In other news, Existing Home Sales and New Home Sales were reported slightly less than expected, but both reports continue to show signs of an improving housing market. The inventory of unsold existing homes fell to its lowest inventory level since April 2007, while the inventory of unsold new homes dropped to its lowest level since January 2007. While some of the decline in new home inventory may be due to builders constructing fewer homes - these reports indicate that the housing market is indeed showing signs of life.

Remember, with home loan rates still low - but slated to increase with the Fed's recent decision - as well as a juicy tax credit for First Time Home Buyers that is going to expire on November 30th, it makes sense to get off the fence if you've been considering a purchase or refinance. Or do you have a family member, neighbor, friend or coworker who might benefit from getting some good home loan advice? I'm always glad to get your referrals, so simply let me know who I might be able to help.

It has been awhile and I am really surprised that the rates are getting into the really attractive mid 4% again (depending on credit score)!!  If you have been thinking of refinancing -- staying in your home for at least 5 more years -- call me and we will see what we can do to lower your payment.  With low interest rates, it can also be a great time to buy that next home.  Prices are truly unbelievable and matched with low rates = perfect time to sell and buy that "move-up" home you have always been dreaming of.

Who knows how long this will last!

This is a really interesting article you may have seen in the LA Times.  It is written by Ken Harney.  Thought I would pass it on in case you haven't heard the news.

Fannie Mae, Freddie Mac are raising fees, toughening rules for credit scores and down payments

February 15, 2009

Reporting from Washington — It's not what home buyers, sellers and refinancers want to hear, but they need to know that Fannie Mae and Freddie Mac are increasing their mandatory fees and toughening credit score and down payment rules as of April 1.

Most major lenders already are pricing in the higher fees, effectively raising costs to consumers immediately.

Under Fannie's and Freddie's new guidelines, even applicants who assumed that their FICO scores would get them favorable rates will be charged more unless they can come up with down payments of 30% or higher. For example, a buyer with a FICO score of 699 who can bring a down payment of about 25% to the table will now get hit with a 1.5% "delivery" fee at closing under the new guidelines.

A buyer with a FICO score between 700 and 720 will pay an extra three-quarters of a point. Even someone with a 739 FICO -- once considered a platinum guarantee of the best rates available -- will get dinged with a quarter-point add-on.

Applicants who seek to buy a condominium and cannot come up with a 25% down payment will be hit with a three-quarter point add-on penalty, no matter how high their credit score, simply because they are not buying a traditional detached, stand-alone home.

Buyers of duplexes, in which one unit is owner-occupied and the other is rented, will be charged a flat 1% add-on from Fannie, even if they've got FICO scores above 800 and make 50% down payments. Refinancers who take cash out at settlement also will be forced to pay extra -- as much as three points if they've got low credit scores and modest equity stakes.

Both Fannie Mae and Freddie Mac say they are tacking on these fees to counter higher risks and losses associated with certain loan products, buyer equity stakes and credit scores. Declining home values in many parts of the country are intensifying losses for both companies when loans go to foreclosure.

Quasi-private enterprises until last September, Fannie and Freddie now are operating under the control of federal regulators and are bleeding billions of dollars of red ink.

Freddie spokesman Brad German said some of the loan categories and credit risk combinations targeted in the latest round of fees "default at four to eight times" the rate of other mortgages in the company's portfolio. "We have to manage these risks appropriately," he added, and that means pricing them based on the probability of higher losses.

But realty agents, mortgage bankers and brokers are incensed at the new round of fee increases, calling them counterproductive in an environment in which housing needs help, not new impediments. They have begun lobbying Congress and the two companies' federal overseers to scrap the latest add-ons.

Charles McMillan, president of the National Assn. of Realtors, complained in a letter to the Federal Housing Finance Agency, the regulator of Fannie and Freddie, that individual fee increases were not only unjustified but in combination they could also seriously deter home purchases. McMillan said "a borrower with a credit score of 670 making a 20% down payment for a condominium would have the fee raised from 150 basis points [1.5%] to 350 basis points [3.5%] -- more than double" under Fannie Mae's new schedule.

"They're shooting themselves in the foot," said Steve Stamets, a mortgage loan officer in Rockville, Md. With substantial down payments of 20% and more, Stamets said, "they don't need to be that tough" on applicants even if home prices decline slightly more before the cycle ends.

"When consumers with 720 credit scores are being adjusted, there is something seriously wrong with the system," said Harry H. Dinham, a Dallas mortgage company owner and former president of the National Assn. of Mortgage Brokers.

As recently as two years ago, FICO scores in the upper 600s were enough to qualify any applicant for prime financing. Now scores of 720 to 740 are the bare minimum if you're going to escape add-on fees -- and still not good enough if you choose to buy a condo or a duplex.

Where's all this headed? Absent congressional intervention or new marching orders from the companies' regulator, the add-on fees are here to stay. But there's an alternative readily available for just about anyone who wants to avoid the fees: FHA mortgages, where down payments go as low as 3.5% & credit scores are not an issue for most applicants.