Southern Maryland Interest Rates Are Going Up

All good things must come to an end they say and it looks like that is true when it comes to the lowest interest rates in 40 years.  Interest rates in Southern Maryland and across the nation are on the rise.  Bankrate.com reports that interest rates have risen in the past two weeks from 4.91% to 5.45 percent.  This is the biggest jump in rates in the past six months.  The BaltimoreSun.com reports today’s rate is 5.34% for a 30-year fixed loan.

    * Interest rates are not expected to go below 5%.
    * Interest rates may hit the 6% mark.
    * Interest rates affect your buying power.
    * Interest rates affect you ability to qualify for a loan.

Interest rates are not expected to go below 5%

    * After a quick rise in interest rates, historically, interest rates fall back but only slightly.
    * Economic and mortgage experts do not expect interest rates to fall back below 5%.
    * According to a Mortgage Rate Trend Survey, it is a split decision whether interest rates will even decline slightly in the next 90 days.

Interest rates may hit the 6% mark

    * Bernard Baumohl of Economic Outlook Group states that interest rates could go as high as 6.5% in the near future.

Interest rates affect your buying power

    * A slight increase in interest rates diminishes your buying power by thousands of dollars.
    * Example:

A home purchased for $266,000 with an interest rate of 4.91% equals a mortgage payment of $1414.
A home purchased for $253,500 with an interest rate of 5.34% equals a mortgage payment of $1414.
Your buying power has been diminished by $12,500.

Interest rates affect your ability to qualify for a loan

    * The loan amount you can qualify for is based on your income.
    * Example: Sales price $266,000

At 4.94%, the required yearly income needed is $68,500.
At 5.34%, the required yearly income needed is $71,500.

Homes prices in the tri-county area of Calvert County, Charles County and St. Mary’s County are at the best affordability levels since 2004.  As the housing market stabilizes, home prices will go the way of the interest rates: up.  First-time buyers and repeat buyers can take advantage of the best opportunity in years: low prices and interest rates.

Although, interest rates have gone up, they are still very low.  Anything near the 5% mark is a great rate.  Don’t let opportunity pass you by.

Bonnie Augostino, your Southern Maryland real estate expert

The New Tax Credit For Southern Maryland’s First-Time Buyers

The federal tax credit for first-time buyers is not really new, but how you can use it is.

The first-time buyers’ tax credit now has two options:

    * First-time home buyers can apply the tax credit to their tax filing in 2010 (for the year 2009).
    * First-time home buyers can apply the tax credit to their down payment and/or closing costs when using FHA financing.

The first-time buyers’ tax credit as a down payment:

    * Can only be used with FHA financing.
    * Can only be used to add to the buyer’s FHA required down payment.

The first-time buyers’ tax credit pays closing costs:

    * The tax credit can be applied to certain loan costs when obtaining FHA financing.
    * The tax credit can be used to buy down the interest rate of the loan.
    * The tax credit can be applied to the upfront FHA mortgage insurance premium (MIP) fee (1.75% of the sales price).

The first-time buyers’ tax credit advantages with FHA financing:

    * A bigger down payment means a lower mortgage payment.
    * Buying down the interest rate means a lower down payment.
    * Buying down the interest rate results in saving tens of thousands of dollars in interest over 30 years.
    * Using the tax credit reduces the amount of money you will need to close escrow.
    * Use the portion of the tax credit you need for FHA financing, claim the remainder when filing your 2009 tax returns.

The first-time buyers’ tax credit when filing 2009 tax returns:

    * The tax credit is more cost effective than a tax deduction.
    * The tax credit is a dollar-for-dollar reduction in your tax liability (what you owe).
    * If you owe less than the amount of your tax credit, you receive the remaining balance in the form of a refund.

The first-time buyers’ tax credit means money in your pocket.

    * Using the tax credit with FHA financing when applied to your closing costs or MIP means you have less coming out of your savings.
    * Using the tax credit with FHA financing when applied to the down payment means a lower house payment giving you more money monthly.
    * Using the tax credit with FHA financing when applied to buying down your interest rate means more monthly money and long term savings.
    * Using the tax credit when applied to your 2009 tax return filing means you owe less to the IRS.
    * Using the tax credit when applied to your 2009 tax return could result in a refund check, which can go directly into your pocket.

The federal tax credit offers a great advantage to first-time buyers in addition to the great Southern Maryland real estate market conditions, which are in the buyers’ favor at this time.

The current low-interest rates offer everyone, especially the first-time home buyer, a great advantage in buying now. Interest rates are hovering at the 5% level, but have going up slightly in the past few weeks due to the increased activity in the housing market.

The housing market is picking up.  So first-time buyers should not let the advantages of buying a home in Calvert County, Charles County or St. Mary’s County pass them buy.  As home prices stabilize, home values increase.  It is likely that first-time buyers will never again experience the advantages of a tax credit, low-interest rates and a real estate market which favors buyers all at the same time again.

Bonnie Augostino, your Southern Maryland real estate professional