Do you think the interest rates for the "jumbo" loan (home mortgages) will drop back down soon?

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If the jumbo premium is 1/4-1/2 pt, fine. Careful: house price will drop in the next year! But buy if you love it.

Normal mortgage rates are now at 6.59% for a 30 year conventional (source: Today’s Wall Street Journal), up from 6.11% a year ago but below their high of 1/40%. This is at the high end of the range over the past five years (with the low around 1.5 points lower), but I think there is a growing consensus that interest rates have been held too low over the past five years. And in the short-term, I’d say there isn’t much chance that normal rates will drop much.

Now, jumbo rates typically are at a premium, by around 1/4 - 1/2 point or a little more. I’d be especially careful today that there isn’t a short-term spike in the jumbo premium as the sub-prime mortgage market has melted down from an increasing default rate amidst lots of leverage taken on by leading sub-prime lenders. This has led some jumbo rates to skyrocket.

Don’t take one of the those. In the last week, the news has had more of this sort of information. But if your jumbo seems to be offered at a normal premium above the current normal mortgage rate, and you can accept that you are coming in at a relative higher rate than the norm over recent years, I’d say go for it.

As I say, I would expect mortgage rates in general won’t stay as low as the low over the past five years. That said, I’d be real careful at buying a house in this current market. Now, if you can get a super-bargain, you’re just anticipating the market.

But the drop-off in subprime lending (which tends to focus on mortgages in the level covered by FannieMae and FreddyMac - $417,000 in 1/40), and the increase in normal rates, is in my opinion presaging a drop in housing prices. Even though your house is in a higher price category, it too will be affected as owners with lower value homes will increasingly find their ability to sell curtailed, and so will not be as much in the market for higher priced homes. And of course, I hope you recognize the current economy has some precarious elements to it.

Make sure your ability to cover your mortgage over the next few years is well-founded. In conclusion - 1. Make sure your jumbo premium is a normal one (1/4 - 1/2 point or so). If so, the rate is ok.

There isn’t much likelihood of a short term drop of any significance in normal mortgage rates. 2. Make sure the price you are paying for the house is reflective of a likely housing price decline over the next year. 3.

If you’ve finally found the house you love, buy it, even disregarding item 2 above. Buying a house is part economics and part love, and it’s worth a lot to have a home you love. But still shop for the best jumbo rate.

Sources: http://www.bankrate.com/brm/graphs/graph_trend.asp?tf=1800&ct=Line&prods=325&gs=275,250&st=zz&c3d=False&web=brm&cc=1&prodtype=M&bgcolor=&topgap=&bottomgap=&rightgap=&leftgap=&seriescolor= .

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What is the interest on a unsubsidized loan as of Aug 2011.

Information on underhanded home mortgages and loan companies.

I owe 25Kmostly in credit cards. Should I take out a 9.5% home equity loan or get 0% interest cred cards til paid off?

If I am purchase a bike on loan can I deduct that interest on loan from my return.

Is is better to invest in a five year interest only home loan at 5.5% and invest what's saved in a 401k earning 8%.

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