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Buying a House or Refinancing Your Mortgage: Is Now a Good Time?

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There is a lot of uncertainty surrounding real estate these days.  With new regulations in place to take effect in the upcoming months and talk of winding down Fannie and Freddy, people are wondering how these changes to the mortgage market will impact real estate.

Here’s a quick recap on recent happenings that will inevitably impact your home buying and borrowing success.

Is Now a Good Time to Buy?

For starters, real estate is a local phenomenon. Many markets have rebounded, but broadly speaking, many forecasters see another 5-10% drop coming across the board in house prices.

The Wall Street Journal recently published an article highlighting four issues to watch related to the housing market:

#1: Jobs: People are not going to buy if they don’t have a job or are concerned about their position.

#2: Delays in the foreclosure process: Much of this is old news, but federal regulators and state prosecutors are still investigating abuses by servicers, their attorneys, and related third parties.

#3: Future of Fannie and Freddie: The future of government involvement in the housing finance arena will drive pricing and eligibility in tandem with the effects of all the new red tape surrounding the financing process.

#4: Underwriting Guidelines: 90% of loan volume production is related to some government entity, so if these rules change or become more restrictive, then private companies will have to bridge the gap — will they?

Congress is contemplating raising the debt ceiling beyond the $14.3 trillion mark to accommodate current and future deficit levels. With current debt around $13.9 trillion, we will hit the $14.3 trillion level soon. So from either a deficit level or growth perspective (remember Obama’s fiscally stimulative tax cut extension) yields and interest rates are poised to go up even more.

Long term treasury yields have crept up about 3/4 of a point to the highest they have been in the last seven months, but they are still decent for those that qualify.

Is Now a Good Time to Refinance Your Mortgage?

The Mortgage Bankers Association is predicting that 30-year conforming conventional fixed rate mortgages will hit 5.5% by year end. This being the case, if you’re on the fence thinking about refinancing, go ahead and do it now while you can.

After April 1st, new Loan Originator compensation rules kick in, so unless you have a stellar credit score it will be harder to find financing for a home. In order to reign in some of the government sponsorship of the consumer indebtedness, the Obama administration is rumored to be considering lowering the jumbo conforming conventional loan size limit to $625,500. This means that if you have a loan higher than this level and less than the $729,750 cap existing today, it’s time to look at refinancing now, rather than later.

If you are thinking about refinancing, make sure your credit is in good standing. You can sign up for Credit Sesame for free to check your credit score, get a full analysis of all your debts and home loans and find out which refinance option is best suited for your needs.

This article was contributed by Cyrus Ghazvini, a lending expert at Credit Sesame. Cyrus has been involved in the Financial Services arena for the last 15 years with the last 8 in Real Estate Finance.  He runs his own lending practice at www.terralender.com.

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