With the Fed no longer spending the tens of billions of dollars monthly on mortgage securities, we will only have the private sector to fill in the gap. When that happens, we can naturally expect mortgage rates to rise. “The difference in monthly mortgage payments of 5% or 6% can be measured in tens of thousands of dollars over the life of a loan,” one writer explains.

The Atlantic Monthly writes that the credit markets need securitization, and warns that it will only become more difficult to borrow money (and those loans will come at higher interest rates) as the Fed program ends. “If you think banks aren’t lending enough now, then you’d find a world with no securitization much worse. Yet, that might be what you get if the Fed ends its program.”

Why would the Fed remove such a successful program? The analogy of a bike with training wheels is often given – if you want an economy to strengthen, recover and stand on its own, at some point you need to take the wheels off. If the Fed keeps rates too low for too long, inflation will rise higher and you will expect to see rates rise anyway. Home loan rates will increase as demand is met, naturally, with or without the Fed.

We can expect the end of the first quarter of 2010 to be a telling time for the economy’s recovery, but the heavy favor of the buyer and borrower is going to change. These will be some of the last months we’ll see that are such great markets for buying a home or land. If you are considering buying, you should begin your search now.

Reasons to Buy a Home Now

The Buyers Market

1. High Inventory: There is currently a balance of supply and demand that leans in the buyer’s favor. High inventory leaves a buyer with many available choices, and in all price ranges.

2. Negotiating Power: The high inventory also allows for decreased prices and more negotiating power for the buyer. Not only can a homebuyer find their dream home, but they can do so for a great rate.

Home Prices

3. Home Prices: Prices have come down a great deal from years past, and will only continue to rise over time.

4. Interest Rates: With interest rates also at the lowest point in years, a single housing payment is going farther than it did in the past. Interest rates will not remain this low, and are expected to rise again soon.

Tax Savings

5. Tax Deductions: Buying a home allows for many tax deductions, such as mortgage interest, mortgage insurance and real estate taxes. This means that after taxes, your mortgage payment will be lower than a rent payment would have been.

6. Tax Credit: The new tax credit for homebuyers has been extended through spring, with an $8000 credit for new buyers and a $6500 credit for repeat buyers.

Personal Savings

7. Appreciation: Home prices always move upward in the long run, appreciating the value in a home.

8. Equity: If you have an amortizing loan, each mortgage payment is building equity in your home. It is such a gradual change many people don’t notice it, but it is allowing you savings.

9. Rising Rents: Rents are expected to continue to rise.

Incentives and Extras

10. Material and Non Material Extras: With the buyer’s extra sway in negotiations, you are able to ask for things that may not have been previously included, such as material items (like appliances) or non material items (such as a home warranty) as part of the purchase of the home.

11. Home Improvements: Many sellers are working hard to make their homes move in ready, with extra home improvements and updates.

12. Maintenance Costs: With updates and repairs before the home’s purchase, a buyer can save money in maintenance along with having a newer looking home.