DreamTeam-Jo Cel Perez & Hector Gamez

Mortgage Rates Decline

According to Freddie Mac on Thursday, the 30 year fixed rate dropped from an average of 4.78% to 4.71% from last week. This is the lowest since Freddie Mac compiled data since 1971. Rates have been low all year because of the Fed’s purchase of mortgage-back securities, which in end in the Sping of 2010. This is helping to push mortgage applications which increased 2.1% during the Thanksgiving week stated the Mortgage Bankers Association. But while rates are low, there are still tight credit standards which may hinder buyers qualifying for the lowest rates.  Most buyers will need 20% down, and a high credit scrore in order to qualify. But the push has helped drive more than 4 percent in purchase applications and nearly 2 percent increase in applications to refinance existing loans.

More Cash Required for an FHA loan

The Federal Housing Administration officials are proposing policy changes for FHA-insured mortgage borrowers to help the agency increase its federally mandated funding requirements. Higher credit scores and an increase in the current minimum down payment may be what buyers across America will have to have an order to qualify for and FHA loan. This proposed change is due to increasing financial issues FHA has been facing, which has increased it’s exposure and led to more delinquencies. The Obama Administration may try to propose other ways of increasing closing costs instead of increasing the minimum down payment, such as increasing mortgage insurance premimums or raising minimum credit score requirements so that the change would only effect the lower scoring borrowers. This will make it harder for some but will also reduce the risk of FHA having financial difficulites. FHA’s traditional role was to help American’s reach their dream of homeownership. The details of the change aren’t expected to be final until next month.

This morning the FED announced its target for the federal funds rate is in the 0 percent to 0.25 percent range.

“Information suggests that economic activity has picked up following its severe downturn,” the Fed said in a prepared statement.

“Conditions in financial markets have improved further, and activity in the housing sector has increased. Household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.”

 The Fed will purchase $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt. This will provide help to mortgage lending and housing markets, and slow the pace of these purchases to allow for a smoother transition.

According to a Goldman Sachs economists this week, the Federal Reserve will probably keep interest rates low to assist with keeping debt low and getting rid of debt. While some think the Fed will probably raise rates, the economists believe rates will be close to zero until the end of 2010 or perhaps even longer. One more year of low interest rates will probably be in the best interest of the economy and help continue to stimulate the housing market, which is still in need of more stimulation.