If you are considering using the Federal Housing Administration Program to purchase a home, you may be hesitating due to news reports of new, low rates of 4.5% becoming available soon. Rates for a 30 year loan at 4.5% certainly grabs the attention of just about anyone considering a major purchase. Of course, if there is a huge demand at those rates for an extended period of time, it could result in higher home prices and an equalized payment. It would also put a strain on servicers such as appraisers and attorneys. Not to mention the now more limited number of mortgage loan originators. Whether or not FHA rates will be around this level remains to be seen. A key thing that you can do now is to get pre-approved for your purchase. If you find a property you like now, then purchasing it now makes sense. In two or three months, that home might not be available, or if it is, it might not be available at the same price.

One of the most challenging parts of any financial services position is dealing with misinformation that abounds which emanate from advertisements, news reports, rumors and wishful thinking. The mortgage business is no different. One thing to remember is this: If the Federal Government is involved, it won’t be quick, and it won’t be the same as what we were led to believe. And the reports trickling out regarding mortgage rates going to 4.5% fall into this category.

History of government announcements regarding the mortgage industry in the recent past that did not result in what was promised include the FHA Secure program to help people in subprime mortgages. Not many people qualified and not many people were refinanced despite all of the fanfare. The Hope for Homeowners program has had little success, either. We all know about the TARP or bailout where just about zero dollars have gone to the intended purpose of purchasing troubled assets out of some $330,000,000,000 spent. And even though US Treasury Yields have plummeted to less than 3% for the 10 year term, Mortgage Backed Securities have not followed suit.

One of the parts of this 4.5% rumor that you may NOT have heard is that it may apply to purchase money mortgages only. And there still could be pricing adjustments based on credit scores, loan-to-value and whether or not PMI is required. So, not everyone would qualify for this rate should it become available. There is a lot of distrust on Capitol Hill for the Treasury Department and how they have spent funds entrusted to them. So, none of this may come to pass until the new administration is installed in late January.

Many people with FHA or VA loans, meanwhile, are waiting on the sidelines. The streamline refinance programs available for both are great for reducing monthly payments without needing a full blown refinancing application processed. They are geared toward benefit to the consumer [lower rate and lower payment], and credit history [the mortgage payments have been made on time]. Closing costs are less for this type of loan and most of them can be included in the new mortgage. No new appraisal is required, nor is re-qualifying for the loan with income and debt analysis. The logic is this: If the consumer is making the payments on time now, making it easier with lower payments decreases the risk of default.

Paul Chandler, Certified Mortgage Professional, is the Newport Branch Manager for Universal Mortgage Corporation. He graduated from the University of Maine’s business school in 1979 and has been in the financial services industry ever since. Since 1991, he has exclusively been involved in mortgage lending, moving to the Newport area in 1993. He also authors a blog at http://www.misterva.typepad.com. He also has been a contributor to Mortgage Originator Magazine. If you have a mortgage related question, please call 802-334-1999.