Despite the downgrading of America’s credit rating there is cause for gay and lesbian home buyers to feel somewhat optimistic. That’s because LGBT buyers now have an even better chance of securing an extremely cheap mortgage to buy a home at price levels that are highly affordable. They also have the unprecedented advantage of knowing where prevailing interest rates are headed over the next 18 months, which can help them lock in a bargain mortgage rate with keen foresight.
The Silver Lining for LGBT Home Buyers
Mortgage rates had already been super low in recent weeks. But as ironic as it may seem, the recent USA credit downgrade has put additional downward pressure on mortgage rates – which will offer LGBT buyers even lower monthly house payments. Meanwhile the median price of residential properties has been tantalizingly affordable for many months.
The day after the markets tanked, for example, the Fed did something totally unexpected by publically announcing what it plans to do with interest rates for the next couple of years. The Fed is notoriously tight-lipped when it comes to revealing its forward-thinking strategies and policies, keeping that information top secret. But this time Fed Chairman Bernanke came right out and stated the Fed agenda for the next two years, declaring that rates will be kept extremely low all the way through 2013. That disclosure injected much-needed confidence into the financial markets and helped the stock market recover almost all of its losses. But it also set the stage for incredibly affordable mortgage rates within the coming months.
Fed Rates Influence Mortgage Rates
Rather than having to play a guessing game LGBT borrowers can now be reasonably certain that mortgage finance rates will remain highly affordable. That’s the next best thing to having a mortgage market crystal ball. As a result, gay and lesbian buyers have a strong incentive to take advantage of some of the cheapest mortgage rates in history.
Normally a downgrade of America’s credit rating would cause investors to dump their holdings of United States Treasury bonds, which would have the immediate effect of raising long-term interest rates. That scenario would be terrible for the domestic economy and would soon propel mortgage rates higher, making it harder for gays and lesbians to purchase homes. Fortunately, however, just the opposite happened. Amid all the recent chaos, economists were somewhat surprised and very relieved to find that investors continued to have a strong appetite for United States Treasury bonds. Financial instruments backed by the USA are still viewed as the best game in town, and as long as investors eagerly buy American bonds the interest rates on loans made in the USA should remain cheap.
A Great Time to Borrow at Bargain Basement Levels
The market for Treasury bonds guides the direction of mortgage interest rates, in other words, and has a big influence on home loan prices. Earlier this year, for example, the federal government invested heavily in purchases of those same bonds by buying 600 billion dollar’s worth. The sole purpose of that stimulus program was to help support the U.S. economy and the housing market by making it easier to borrow money at inexpensive rates.
That particular program ended a couple of months ago, however, to the chagrin of many people in the real estate industry. But in light of this month’s financial upheaval government officials have already hinted that they may resume the intense buying program – which would do even more to keep mortgages inexpensive. While these conditions continue, LGBT borrowers can use a safe fixed-rate mortgage and lock in a rock bottom rate. That virtually guarantees low monthly payments for the life of the loan.
But LGBT Buyers Should Control Mortgage Risk
Using an adjustable rate mortgage (ARM) right now is not recommended, however, because with rates so low there is little room for them to go any lower. Economists concur that within 3-4 years rates will likely go much higher, especially as the economy recovers, and that will typically make ARM loans more expensive. So it is best to rely on safe, predictable fixed rate mortgages for the next 2-3 years.
Gay real estate experts also generally recommend leveraging the value of working with a LGBT or gay-friendly Realtor.
That’s because gay and lesbian home buyers have special considerations that are best addressed by someone who is keenly familiar with the unique issues faced by LGBT buyers. Those include, for example, experience with legal complications that gay and lesbian couples may encounter when cosigning deeds or mortgages. Gay real estate agents typically also have firsthand information about where to find the most supportive gay-friendly communities.
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