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The Mortgage Market: It's Not All
Bad News
Unless you haven’t picked up a newspaper,
turned on a TV, or browsed the internet in the past few months, you’ve
undoubtedly heard about the supposed woes of the mortgage industry. With
the media trumpeting the problems of subprime mortgages and high rates
of foreclosures, you may think that the mortgage market is in disarray
and that you should hold off on buying or refinancing.
But don’t be fooled. With prime lending
still strong, interest rates holding steady, and plenty of solid options
for refinancing now may be the best time to buy or refinance.
Good news for prime mortgages.
Lately, the media has been sensationalizing the difficulties of
borrowers with subprime loans (i.e., borrowers with poor credit who have
mortgage with high payments). But that’s only a small part of the story.
What about prime mortgages? If you have an above-average or good credit
score, prime lending is not only stable, but it also offers plenty of
flexibility. Lenders may have tightened up on subprime lending, but if
you qualify for a prime mortgage, your options are as plentiful as they
were during the boom in the housing market a couple of years ago.
Good news for interest rates. Lost in
the hoopla about the (so-called) demise of the housing market has been
the recent trend in interest rates. To the surprise of many, interest
rates have not only held steady lately in the last few month, but have
also fallen very recently. Currently, the average rate on a 30-year
fixed-rate loan is 6.16 percent. Last year at this time the average rate
was 6.35 percent. As for the future of interest rates, the Federal
Reserve is predicted to take no further action in the near future after
the prime rate was raised a number of times from 2004 through 2006.
However, this window of opportunity may not last forever, so now may be
the time to take advantage of these rates.
Good news for borrowers with ARM’s.
According to many experts, the main reason the rate of mortgage defaults
have increased lately is because many adjustable rate mortgages are
resetting at a higher rate following these ARM’s low introductory rate.
Many borrowers who took out ARM’s at the height of the real estate
market are now experiencing a sort of mortgage sticker shock. The
solution? For many borrowers, relief may come from refinancing with a
conventional fixed-rate mortgage or else a hybrid ARM that has more
stable monthly payments. Although such an option is not viable in all
cases, if your mortgage has adjusted upwards dramatically, you should
talk to your lender or broker about refinancing your loan.
So in looking at the full picture, the news
from the mortgage front is anything but doom and gloom. On the contrary,
the mortgage market—coupled with a housing market that favors buyers—is
as strong and steady as ever. ∆ |
