A few years ago no one would have believed what is happening in the mortgage business right now! The Federal government has announced it will buy up to $500 billion in mortgage backed securities over the next 6 months and this is forcing conforming fixed rate loans down to their lowest EVER! Even in the outrageous flurry that was the refinance boom of 2001, 2002 and part of 2003, we never saw a 4.5% 30 year fixed! These are unprecedented times!
Of course, it is now much more challenging to qualify for a loan and these rates are only for conforming loan amounts up to $417,000 and you must qualify – i.e. no more stating a made up income or not bothering to show income at all. In order to get a loan you must have a documentable income, decent credit and typically at least a little money in the bank.
What is even more unprecedented is that typically when rates are low, home prices soar. That’s not happening right now. What’s happening right now is about as common as a solar eclipse: we have rates stable under 5% AND home prices stable to bargain basement depending on the neighborhood! What a better time to pick up more real estate – whether you’re a first time buyer or a savvy investor!
Of course, as I said, you must be able to qualify. In the old days (even as recently as summer of last year) you could finance up to 10 properties and get a mortgage without documenting your income. Now you must be able to document your income and you may only finance up to 4 properties if they are not your primary residence. This makes life a bit more challenging for investors, but it hasn’t slowed down the first time buyers much at all! FHA is still a very viable option for many new buyers and remember, FHA isn’t just for first time homeowners. You can ALWAYS use an FHA loan if you don’t have perfect credit or a lot of money to put down on the purchase.
What do you do if you have a loan over $417,000 and you want to take advantage of low fixed rates? Consider getting a home equity line of credit for the difference. With the Fed Funds Rate hovering at a range between zero and 1%, lines of credit are being found for as low as 3%! Of course, you need to remember to lock in a fixed rate on that line of credit once the market starts to rebound, but for the next year or so, this is about as cheap as money will ever get!
The best way to know if you can take advantage of this unprecedented opportunity to own and finance real estate is to call your lender.
Liana Pomeroy is a Certified Mortgage Planning Specialist with Cherry Creek Mortgage. She is best reached at 303-601-5197 or lpomeroy@ccmclending.com or visit her website at www.homewisedenver.com or www.denverhomewise.com.
