How Would You Like That 4.5%, 30 Year Fixed Rate?

With or without points?

If Sec. Paulson has his way, it may be the prevailing rate soon. The Wall Street Journal reported today that a plan is being mulled over to use the Federal Government to lower Fannie and Freddie Mac rates, as well as government insured FHA rates to 4.5% for a 30 year fixed rate.

The thought process is that this would help jump-start the housing sector by causing more fence-sitters to jump off and start buying. And, that would allow a whole lot of those folks who have been staring at ‘For Sale’ signs in their front yard to get some activity going and get a buyer -* with the caveat that buyers are still going to be looking for a good deal, and the pricing model of two years ago is no longer valid. Sellers still need to be realistic about prices NOW, not months ago.

The chain reaction that Paulson would hope for, if this plan goes through, is:

Buyers on the sidelines would jump in an buy, especially First time homebuyers using low rate FHA financing, then -
Move-up buyers would begin to buy the next price tier up, reducing the glut of inventory of homes, then -
homeowners in trouble or about to be in trouble would refinance at the low, 4.5% rate, and stave off possible foreclosure, then -
The log-jam of homes in pre-foreclosure and on the market around Atlanta would begin to dissipate, then -
Credit would begin to free up again, and lenders would come back into the market with some of the other loans that make sense and perform well, such as higher LTV Jumbo financing.

So, if the plan is approved, look to jump into the market early. My suggestion would be to get pre-approved – and of course I can help with that – and begin to work with a Realtor to narrow down the right home. Then, jump on it and put in an offer as soon as rates come down; if indeed all this comes to pass.

The reason that I would jump on it is not only because we do not know how long rates will remain low; but more importantly because the plan just might work. If it does, then as soon as sentiment towards the housing market begins to change to positive again, sellers will remain more firm with their asking prices and those prices will stabalize and begin to rise again.

This time around, the Early Bird will get the worm.