What the Bailout Means for the Housing Market

October 9, 2008

What does the government bailout mean for the housing market?

Are you left wondering what exactly the recently approved government bailout of Fannie Mae and Freddie Mac means for you, the homeowner or potential homebuyer?  According to Jay Brinkman with the Mortgage Bankers Association, this should signal the marketplace that there will be a floor on interest rates.  This means that, while the government continues to pump capital into mortgage securities, there is more money available for home mortgage loans at much more favorable rates.  However, this doesn’t necessarily mean it is as easy as it used to be to get a mortgage.  If you have lower than desired credit or are below the required income level for the loan you are trying to acquire, you will have difficulty getting that home loan.  The upside of this is that you won’t be allowed to buy outside your means, putting you in a potential cash crunch that so many families are experiencing today.  Provided that the bailout package is successful and creates much needed consumer confidence, the lower home prices and modest interest rates should kick the housing market into gear again.  Before the bailout plan, many financially strapped homeowners were headed straight for foreclosure.  Now, the government has temporarily put a halt to foreclosures to see if there is a way to work out a deal with those homeowners to repay the loan at terms they are better able to afford.  It may be months before we find out the exact details of what the government’s bailout means for everyone.  But, rest assured that the housing market will come back again.

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