The US government is spending trillions of dollars to keep our ailing economy afloat. This has already softened the free fall in the equity markets and hopefully we will see it in our housing markets. But it comes at a cost, which is the likelihood of higher taxes and inflation in the future.
My friend Tom Millon, a secondary mortgage market specialist in the U.S. mortgage business, says it this way in his recent newsletter, "Never fear. We have a new put option protecting us. Remember the Greenspan put? That's the one that protected the stock market in the late 'Nineties. It was always safe to buy stocks because Greenspan would lower rates to support stocks every time they dipped. Today we have the Obama-Bernanke-Geithner put option." The new put option Tom is referring to is government subsidized mortgages. Our government is using printing money to buy mortgage back securities, which has pushed mortgage rates down to an artificially low price. This free money is being offered to you or anyone else to go spend on a new house or refinance your existing one. Everyone in the country who can afford to buy a house or refinance must take advantage of this "put option". It is basically free money and will not last!
The downside of this government generosity is it debases our currency and increases our debt. There are no free lunches and it may unleash inflation. Imagine a future with inflation above 5% and interest rates above 8%. Your house will be going up at this time and you will have locked your mortgage at 5% or below! There is no better way to protect yourself, except maybe moving to a Latin American Country, from the pain that is yet to come! Pay down your loan if necessary to qualify. Conforming loans are now up to $729,000.
1st Portfolio recently purchased a mortgage company, previously known as Pineapple Lending, now called 1st Portfolio Lending. Please give us a call so that we can analyze your personal financial circumstances and help you save on a new home mortgage. If you mention this newsletter, we will provide you with a $250 closing cost credit to reduce your expense.
