Mortgage Market Update
The US Treasury Department and the Federal reserve have outlined a proposal to aid Freddie Mac and Fannie Mae amidst their recent difficulty. Fannie Mae and Freddie Mac own or back $5 trillion in home mortgages across the country. The financial health of these two companies is critical to the US housing recovery process.
Despite investor concerns that caused their stock price to fall, Treasury Secretary Henry Paulson expressed his support for helping these two companies maintain their roles in the lending marketplace. The Treasury is offering access to higher lines of credit, while the Fed is proposing that Fannie and Freddie be given access to funds through the Federal Reserve Bank of New York.
Fixed Rate mortgages for a 30 year loan have bumped up to the mid 6 percent range. The National Association of Realtors (NAR) reported a slight slowdown in existing home sales during the month of June. NAR is currently projecting annual home sales at 4.86 million units for 2008.
Finance Q and A:
Q: Is it wise to pay discount points up front to get a lower interest rate?
A: Depending on your plans for staying in the home, there are benefits to paying discount points to lower your interest rate. Over time, the savings realized from your lower interest rate will offset your initial expense of the lower rate loan. However, this strategy does not work well for buyers planning to move in a few years, who may want to opt for the higher rate. Consult with your mortgage planner today to compare options that work best for you.
Tip of the Month:
When buying a home, its good to get your financial house in order by doing a few small things ahead of time. Pay off small debts and get them off of your balance sheet, since the amount of outstanding credit can work against you when applying for larger loan amounts. You should also check your credit report for any blemishes or misreported items. You are entitled to receive a free credit report each year directly from the consumer credit reporting services. By reducing your debt and checking your credit report, you put yourself in the best position to acquiring a favorable mortgage.
