Mortgage rates are falling fast, thanks to the Federal Open Market Committee's statement increasing support for the mortgage market. U.S. central bankers announced plans yesterday to buy as much as $300 billion of long-term Treasuries, and to more than double mortgage-debt purchases to $1.45 trillion, in an effort to lower home-loan and other interest rates. The statement from the FOMC stated that its main rate would remain at almost zero, quite possibly for an “extended” time. The rate for a 30-year fixed was just under 4.7% this morning and is likely to fall a bit further. Some newsmakers opined that rates could fall to 4.5%.

While this is good news for homebuyers who are buying right now, this poses two potential problems for homebuyers who are still stalling on their decision to purchase.

When the economy begins to rebound, the sudden influx of money is expected to lead to inflation. Anyone who remembers the double-digit interest rates in the 1980's may want to think twice about waiting in hopes that housing prices will drop further. There are already many REOs on the market that you can buy for less than the cost to build; at this point, these can be purchased with really low-cost financing.

Another problem which will likely worsen is already causing headaches for my buyers. As rates drop, the mortgage lenders are flooded with requests to refinance. Already the lenders I work with are busy with refis, including "short refis," and buyers -- who generally get preferential treatment due to escrow deadlines - are waiting an extra four or five days for loan approvals.

I've had to request extensions to the close of escrow date for three buyers this month due to lender delays. Not only will these three buyers need to pay more interest up front if these close after the last day of the month, but they may very well incur "per diem" charges of $50 to $100 per day -- the fee charged by the bank when the buyer fails to close on time due to no fault of the seller.

If you have a home in escrow, be sure that your lender is going to be able to close in a timely manner. I am e-mailing or phoning my buyers' mortgage officers every day advocating for a timely close. When yours is one mortgage application in a stack of applications, make sure your Realtor is looking out for you and is in constant contact with your lender and the title company. And if you aren't going to be able to close on time, make sure it's the seller's fault!

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