A week ago, the Treasury announced that they had a target mortgage rate in mind of 4.5%. Mortgage rates are already very low, as evidenced by a sudden increase in refinance activity. Orange County cities such as Irvine, Tustin, Orange and Newport Beach are seeing a big rise in refinances, helped by the fact that a larger percentage of homeowners have equity in their home, as compared to some other California Counties, like Riverside and San Bernardino.
Lower rates will definitely spur more activity in sales, as seems to already be happening. The LA Times recently reported an interesting thing that happened after the Treasury's announcement. Some potential home buyers actually hopped back "on the fence", thinking there may be a specific 4.5% loan program coming that would benefit them. At the time of this writing, a 30 year fixed rate is essentially at 4.875% (5.185% APR). Mortgage rates and lower property values have already created more affordability than we've seen in years. It would be crazy to sit out much longer.
The Government has already put into place a $7,500 Tax Credit for First Time HomeBuyers, which, when combined with low rates, is getting the attention of home buyers. As we head into 2009, momentum that is already beginning to build should continue. With Conforming and FHA mortgage limits set at $625,500 for Orange County. Since FHA will only require a 3.5% down payment in 2009, an Orange County home buyer can purchase a $645,000 home with only 3.5% down. Plus, the down payment can be a gift, or even a loan from a 401K. There are a lot of homes that fall within those parameters.
2009 should be a great year as so many renters realize they are able to buy a home for essentially the same payment they pay for rent, after tax benefits are considered.
Authored by Tim Storm, CMPS, Sr. Loan Officer with Frost Mortgage, a Direct Endorsed FHA Lender located in Irvine, CA. For information on FHA, or to be prequalified please call 877-786-4243 x 7.
