If you have been listening to the news the past few days, you have probably heard about the federal government’s offer to back Fannie Mae and Freddie Mac with emergency funds, if needed.
Fannie Mae and Freddie Mac own about half of all the mortgage loans in the country. According to those in the know, both Fannie Mae and Freddie Mac are financially sound and are not facing any crisis. They have definitely been affected by the current high rate of foreclosures across the nation, but that trend is on the wane which means their stability will be increasing rather than decreasing.
So, why did the Feds offer a “bail-out” option? To offset last week’s decrease in Fannie Mae and Freddie Mac stock values and to boost investor confidence in the financial sector of the economy. It is very unlikely that Fannie Mae or Freddie Mac will take advantage of the extension of credit lines or discounted interest rates offered by the government.
The negative news regarding Fannie Mae and Freddie Mac, along with other economic factors is enough to make anyone considering a home purchase very nervous, simply because they do no know how this affects them. I will try to boost your confidence by giving you a few facts.
Mortgage credit will remain tight but not unattainable. This will not affect interest rates. Mortgage interest rates are most affected by the bond market. Currently, more investors have moved their money to the bond market, feeling it is safer than the stock market. Because of the increase in bond market investors, rates have declined in the past few weeks and would have declined further if the stock market had fared better on Friday. The Feds are not expected to raise rates when they meet again on August 5th.
Current rates have been vacillating between 6.15% and 6.35% this week. Interest rates are lower than they were at this same time last year. Rates will remain volatile; so when you find an interest rate that works for your budget, lock it in. This is not the time to wait and see what the rates will be next week.
Your ability to purchase a home in Southern Maryland has not really changed. The ability to qualify for a home loan is still based on your personal credit history, income and funds available for a down payment.
According to all the reports I have read this week, the road to recovery is for more Americans to enter the real estate market as buyers. As home sales increase, the housing market reports will improve and investor confidence will increase. At this point in time, it is fear that will keep America from recovering. You can take advantage of some of the greatest real estate opportunities due both to continued low interest rates and home affordability.
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