Sue Fox, @Properties. Direct 773.816.1788
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I know it’s a snowy mess outside, but Chicago’s “spring” home-buying season has already begun. This usually happens the week after the Super Bowl in early February, but this year everything is gearing up a month earlier because many buyers are trying to take advantage of the federal home buyers tax credits, which expire in April. Mortgage rates aren’t waiting either, and if you plan to buy this spring it’s time to lock your rate now. Here’s why:
1) The federal government is about to let rates rise. For much of the last year, the mortgage market has been on government life support, and it’s been working. The Federal Reserve has been buying $1.25 trillion in mortgage-backed securities to help keep credit flowing, pushing rates to historic lows of below 5%. But it has announced it will wind down this program by March 31. Without this massive government aid, rates will rise.
2) Mortgage rates are already creeping up. Long-term interest rates (like a 30-year fixed mortgage) are already rising in anticipation of this move. One of my buyers (with excellent credit and solid income) just told me he was being quoted a 5.25% rate from various lenders, which is still a darned good deal. Many economists are predicting mortgage rates could soon jump a half point to a full point.
3) Acting now can save you thousands of dollars each year. If you’ve never had a long-term loan, and many first-time buyers haven’t, you might not realize the huge difference just a percentage point can make when it comes to interest rates. An example: Say you borrow $300,000 to buy a house. At today’s 5.25% rate, your mortgage would cost $1656 per month (before taxes and insurance). At a 6.25% rate, however, that loan would cost $1847 per month — or $2,292 MORE each year.
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