How low will they go?
Have you had a look at the mortgage interest rates recently? You may need a bump up in the power of your reading glasses to be able to see the tiny, tiny numbers – so tiny, in fact, that most of us were tiny ourselves the last time rates like this were around.
Mortgage rates are now at an all time low, hovering around 4.5 percent for a 30-year, fixed-rate loan, the lowest since Freddie Mac began tracking rates in 1971. Prior to that the only time rates were lower was in the 1950s, but these fixed-rate mortgages were for a 20- or 25-year period. Rates for a 15-year, fixed-rate mortgage are even lower – right around the 4 percent mark depending on the day. The difference between a 5.5 percent 30-year, fixed-rate mortgage, which we had less than two years ago, and a 4.5 percent fixed-rate mortgage on a $300,000 loan is $183 a month. But more important than the monthly savings is the extra buying power which translates into about $40,000 of more home you can afford.
According to the opinion of some financial gurus these unbelievable rates are expected to remain that way at least through the beginning of 2011, based on investors continuing to purchase safe U.S. Treasury bonds, which mortgage rates tend to track.
However, if you’re thinking about purchasing a home, I wouldn’t get too comfortable with the long term predictions. Mortgage rates, if we’re lucky and the gurus are right, may stay low for many more months, but housing prices aren’t especially low on Anna Maria Island. The combination of low rates and low price tags have finally converted into the beginning of a serious market comeback complete with appreciation.
With most of the country, the state of Florida and Manatee County still experiencing declining home values, little Anna Maria Island is proving the long held theory that all real estate is local. According to Zillow.com, Anna Maria and Holmes Beach have had five straight months of appreciation, while Bradenton Beach had four straight months. With the beginning of the traditional winter buying season on the horizon, it’s likely we’ll see a lot of activity inching prices gradually up.
Qualifying for a mortgage and getting preapproved should be your first step in taking advantage of the low rates. Preapproved, as opposed to prequalified, means that the lender has already checked your credit and evaluated your financial situation, and is ready to go forward with a loan pending an appraisal of the property, title report and purchase contract.
Even though mortgage qualifications are tighter than in the sub-prime era, there is still plenty of money available for quality burrowers. Lenders have traditionally wanted you to make all monthly payments using no more than 28 to 44 percent of your monthly income and are going back to these guidelines in the wake of the sub-prime mess. There is, however, flexibility within these ranges if you have an excellent credit record, the higher your credit score, the easier it will be to get a loan at an optimum rate.
I saw a billboard in New York City recently that said, “The sooner you park your car, the sooner you can stop thinking about parking your car.” If I had a billboard on Anna Maria, I would say, “The sooner you buy a home, the sooner you can stop thinking about buying a home, and the sooner you can start to build equity.” Tiny rates plus tiny listing prices equals big results on a tiny island.