"Can you still get a 5% mortgage?"

Can you still get a 5% mortgage?
Atricle By: Les Christie, staff writer March 24, 2010

New York (CNNMoney.com)-There's still time to get a 5% mortgage but the window is closing. On April 1, the government will stop buying mortgage-related debt, which will send interest rates slowly higher.

Since November 2008 the Federal Reserve has snapped up $1.25 trillon worth of mortgage-backed securities--essentially, people's mortgages bundled together and sold to investors.

The program has kept interest rates artificially low over the past year, with the price of a 30-year fixed-rate loan ranging between 4.93% and 5.09%, according to morgage giant Freddie Mac.

That's about 0.4 percentage points lower than these loans would have been without the government's intervention, according to Jay Brinkmann, chief economist for the Mortgage Bankers Association.

But when the Fed stops buying and cedes the playing field to private investros, they will almost surely demand better return for their risk.

"Rates are going to be higher than they are now," said Brinkmann.

How much higher is the question.

"It's really hard to tell right now," said Amy Crews Cutts, Freddie MAc's deputy chief economist. "The Fed said it will taper offer (purchases) gradually. Each week they buy less than the week before."

DANGER! Falling home prices
So far, though, the tapering has failed to spawn higher rates. Last week, the 30-year was just 4.96%

Still, all of the experts agree that mortgage rates will climb. The good news is that none of them think the increase will be very large.

Their projections are for a gradual run up to between 5.5% and 6% by December. Brinkman's projection is a rise to 5.7%; Cutts is to 5.75%.

That will add only about $70 to the monthly payment on a $150,000 note. That's still very reasonable and should not discourage many consumers.

Homebuyers may even find themselves paying less every month as housing markets continue to experience price declines.

Industry experts are projecting further home price drops of 5% to 10%. That would wipe out every bit, and more, of the monthly payment increases higher mortgage rates would bring.

Above Atricle By Les Christie, staff writer March 24, 2010. (NewYork CNNMoney.com)

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The Basics:Extended Home Buyer Tax Credit 2009/2010

Learn more about the Extended Home Buyer Tax Credit 2009/2010

"Bringing the Dream of Homeownership Within Reach: As a part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress has passed new legislation that:"

To read the entire article from Realtor.org-National Association of Realtors, click on the below link.

http://www.realtor.org/home_buyers_and_sellers/2009_first_time_home_buyer_tax_credit

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