Will mortgage rates drop again?
When the Fed initially announced that plan in November, andwhen it reaffirmed it two weeks ago, rates promptly plunged-- although only for solid, creditworthy borrowers with bigdown payments or lots of equity in their homes. These borrowers discovered recently that they could get 30-yearfixed mortgages in the 4.5% range.
They have since edged back up to just under 5% for solidborrowers who pay a 1% upfront fee and shoulder about $3,000 in closing costs, mortgage brokers said.
So what's all this back and forth mean to someone moving to Frederick and needing a mortgage?
...when the market expects the Fed to lower rates, theystart snatching up bonds quickly while higher interestrates are still available. That drives up demand and allowsbanks to lower rates. And if the stock market is performingpoorly, investors look for mortgage backed investments asan alternative, again, pushing mortgage rates down.
What's happening now?
This is what should be happening now, right?
The equities markets are uncertain and volatile, and the Fed continues to lower rates, driving up present demand for bonds and mortgage backed investments, thus pushing mortgage rates lower. But it isn't happening the way it should. Investors are avoiding mortgage-backed investments and while are low, they certainly aren't as low as they should be considering the factors in the market and history.
It means you should buy a home for reasons other than it's investment potential. People bought homes before property values went up more than you earned in a few years, didn't they?
Why should you buy a home in Frederick Maryland?
You need to be close to a high income work center... you can do a whole lot of work from your computer but at some point you are going to have to go into the office. That office is likely to be close to DC. So where do you buy a home?
Montgomery County is just plain too expensive, Virgina isn't much better and you'll have to cross a bridge or two. Prince Georges is out of the question... where does that leave?
And another point since this post started out in investment terms:
They ARE going to replace the American Legion Bridge... at some point it's going to happen.
They ARE going to build an outer Beltway if for no other reason than to route tractor trailer traffic away from DC.
Montgomery County is NOT going to let that bridge go through Dickerson or Poolesville.
Where does that leave?
FHA Loan Limits
Issue # 44
Life in Frederick Maryland Online Magazine
January 10, 2009