Mortgage Rates Are The Lowest Since 1940

"In the field of observation, chance favors only the prepared." - Louis Pasteur

Mortgage Rates Are The Lowest They’ve Been Since 1940

Dear Dr. Manny: Recently I saw an advertisement on the internet for 30-years fixed rates at 3.5%. Is it really possible to get such a low rate at this time?
- Hopeful

Dear Hopeful: The good news is that mortgage interest rates have been relatively low for some time. According to an article in the San Francisco Chronicle they are lowest since 1940 (click on the links to read two articles Mortgage lenders reluctant to refinance and Freddie Mac tracks interest rate rise).

A 3.5% interest rate is available for conforming loans up to $417,000 fixed for 5 years with about two points. Loans that are fixed for 30 years, are below 5% with the cost (points or no points) changing every day. Recently, one of our clients chose a 4% with 4.5 points for $170,000, 30 years fixed with higher payments. It could have been 4% with 3 points for a 15 years fixed rate.

Each client’s circumstances and qualifications vary; therefore, it is difficult to quote the rate without having knowledge of one’s recent credit score and
appraised value, since the loan to value affects the rate as well.

Some of our borrowers use refinancing to consolidate their first loan with an existing line of credit, to avoid a possible future increase in rate. Others choose low rates that are fixed for five years, in order to have lower monthly payments. (One can choose an interest only option.)

Because of the tougher loan underwriting refinancing takes a longer time. We have to lock rates for 45 days that are higher rates than 15 or 30 days. Sometimes borrowers want to gamble and wait to lock a lower rate when their loan is approved and all conditions are removed. This can be risky, since rates have a tendency to go up.

Low interest rates are a great stimulus to buy real estate. During the holidays, there is less competition (click here to read about it). One needs more time before looking for a property, in order to get a pre-approval. If the subject property is a short sale or foreclosure, it might take some time for the selling bank to accept the offer. During this time rates might change in any direction.

Wishing you a Healthy and Prosperous 2010!

Your Friend
Manny Kagan

P.S.

With 2009 coming to an end, I am grateful for many things. I feel this is a good time to reflect and pray for a better future.

On a personal side: five months after having hip resurfacing surgery, I feel great. We took two great vacations to Yellow Stone National Park and to Chicago. You can see photos from these trips on my website www.mannykagan.smugmug.com.

My photo show at Chouchou restaurant draws a lot of attention. One of the visitors, an art curator Hanna Reger wrote to me: “Thank you so much for sharing your talent! The photos are beautiful and you can compete with any photographer. What a great eye for details!”

The photos will be up until February 14, 2010, if you or your friends would still like to see it. The address is 400 Dewey Blvd., San Francisco.

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