If you haven’t read the 2010 Mortgage Rate Outlook by HSH Associates then you should. Especially if you are considering buying a home or refinancing a mortgage this year. Their forecast neatly lays out a case for higher mortgage rates by year end.

The driving factor will be the Fed’s program of purchasing mortgage-backed securities. It’s set to come to an end on March 31. By industry estimates the Fed’s current hand in the market means that conforming fixed-rate mortgages are about three quarters of a percentage point (0.75 percent) below where they would be otherwise. How much rates can rise depends on how much private investors will buy into the mortgage-backed securities market and how strong their demand will be. Right now it’s anyone’s guess. That to me is enough of a case that mortgage interest rates will be on the rise.

Need another reason? Here it is: the Home-Buyers Tax Credit will expire in April 2010. When this credit first neared expiration, there was a flurry of home-buying activity and an uptick in demand for mortgages, causing mortgage rates to rise slightly. So if there’s another rush of buying to take advantage of the credit between now and April, this could also cause rates to rise.

Also, with some improvement in the economy, the Fed will need to start laying out a plan to remove some of the massive amounts of liquidity it’s been pumping into the system. To that end, the Fed already announced it’s raising the interest rate it charges on short-term loans to banks by a quarter point. As the mortgage market transitions from near complete government support to being supported more by the private market, there should be a return to “normal” mortgage rates.

All this means so long to the low rates we are seeing now, which have been the best rates in nearly 50 years. Mortgage forecasters think rates could increase by a half percentage point to a full point, which is a big increase from the near five percent rates we are seeing now.

Home buyers on the hunt for bargains should still be able to find them. There is set to be another wave of failed loans driven by job losses and some that will fail again after unsuccessful loan modifications. Also, another batch of pay option ARMs will hit their five-year “recast” mark this year — many of these folks will not be able to afford the increased mortgage payments that include all the interest and a small amount of principal, even at interest rates of three to four percent. The result of this continued wave of loan failures is more homes on the already over-supplied market. Buyers should expect to continue to find reasonable or even cheap prices for existing homes. But the only direction for mortgage rates from here is likely up.
By Ray Martin

If you’ve got the credit but not the cash, there are programs to assist first time home-buyers to clost the gap between dreaming about and actually owning their own home. Prices and mortgage interest rates have never been equally lower making this the perfect time to make your dream of homeownership a reality.

Nevada Housing Division offers programs for new homebuyers The State of Nevada Housing Division’s First-Time Homebuyer Program is being offered to help the state’s low-to-moderate income residents buy a home.
“Today we can offer prospective homebuyers an amazing low mortgage rate of 4.5 percent,” said Charles L. Horsey, administrator, Nevada Housing Division. “The Division was established in 1975 and historically this is the lowest rate we’ve ever been able to offer Nevadans.”
In addition to the 4.5 percent, mortgage interest rate, the division offers a down payment assistance program of up to $4,500. If eligible, the buyer can also take advantage of up to $8,000 federal tax credit for first-time homebuyers and up to $6,500 tax credit for repeat buyers.
A first-time homebuyer is considered to be anyone who has not owned a home within the past three years. However, these conditions are waived for veterans if they meet the income criteria. The division’s income limits represent one of the highest limits of any government program anywhere in the state. For a household size of 3 or more persons, income limits range from $75,785 up to $103,320 per household, depending where in the state a family resides. The maximum purchase price of a home ranges from $258,691 up to $409,587.
The Nevada Housing Division serves all areas within Nevada, both rural and urban, and has more than 50 participating lenders serving the state. Since the Nevada Housing Division’s creation in 1975, the agency has funded more than $2 billion in loans and has assisted more than 20,000 families achieve homeownership.
Anyone interested in learning more about the Division and learn about qualifications for the 4.5 percent mortgage rate, visit nvhousing.state.nv.us. The Web site features criteria for securing a loan, steps to follow in becoming a homeowner, along with a list of participating lenders.
Feb. 06, 2010
Las Vegas Review-Journal