It has only been a few days that the mortgage rates slipped below 5% and mortgage loan applications have already jumped up by 13% since last week. The average rate is 4.9% but some rates can be as low as 4.65% for a fixed, 30-year mortgage.
Homeowners who purchased a house for $250,000 at 6% rate are making monthly payments of $1,500 but with the rate at 4.9 now, monthly payment is only $1,326. This means monthly savings as much as $174 per month. If your house costs $600,000 at 6% rate, you will be saving even more, $400 per month, from the original monthly payment of $3,600. With this kind of savings home sales have jumped up. The real estate market is like putting up a flashy “time to buy” sign as interest rates below 5% is a magical number for home buyers.
Even people who have just lost their jobs and have their house in foreclosure are not trying to sell their homes as they would usually do. Instead, they are talking to their lenders, negotiating to modify their mortgage. It does seem like the best time to either get a mortgage loan modification or apply for a first mortgage.
It is also wise to look ahead because the interest rate will not be low forever. The Fed has already said that it would stop buying mortgage bonds next year in March 2010. Originally they were going to stop buying bonds 3 months earlier. By doing so it is very possible that the mortgage interest rate will go back up again in 2010.
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