Mortgage Rates Drop Below 5 Percent: 4 Things to Know

With all the doom and gloom in the housing market, you might have missed this nugget of good cheer: 30 year, fixed mortgage rates have fallen below 5 percent—to 4.96 percent—for the first time ever, according to Freddie Mac. Lower rates have already triggered a wave of refinancing applications and could work to spark some much-needed demand in the housing market. Here's five things you need to know about the trend:
1. Uncle Sam is behind the dive: Fixed mortgage rates have been falling in recent months for a number of reasons, such as lower inflation and investors' flight to quality, which has helped drive down yields on 10-year treasuries. (Fixed mortgage rates typically track the yields on 10-year T-bills.) More important, the Fed has recently undertaken an initiative to purchase hundreds of billions of dollars in Fannie Mae and Freddie Mac debt and mortgage-backed securities. The Fed also has suggested that it may begin buying long-term treasuries directly. Both moves have been big factors in the decline.
[Check out Mortgage Rates in 2009: 7 Things You Need to Know.]
2. The long-term outlook remains favorable: Although rates could certainly increase from these record-breaking levels, they should remain attractive for the rest of the year. Thirty-year fixed mortgage rates will "wax and wane" in the 5½-to-6 percent range before closing out the year somewhere between 6 and 6¼ percent, Keith Gumbinger of HSH Associates, told me recently. "That's still very attractive," he said. "There is no reason to think that rates are going to go up so substantially so as to erode the marketplace." CLICK HERE TO VIEW THE ENTIRE ARTICLE

Low Interest Rates, Low Housing Prices and Lower Down Payments

The home buying stars have aligned, and they’re telling you to take advantage.
1. Mortgage interest rates have dropped to the lowest they’ve been in 50 years. With mortgage rates at historic lows, the number of people applying for mortgages has hit near record highs. (If you've never been one to jump on the bandwagon, now's a good time to start.)
2. Low housing prices. This isn't "new" news by any means, but it's an important part of the equation (which equals 'perfect time to buy a home'). Housing values have fallen steadily over the past two years and in turn, so have their sale prices.
3. Low down payments are available on FHA loans. FHA loans (safe, government-backed loans) let you purchase a home with 3.5% down. Let's consider this: If you're buying a $200,000 home, your down payment (not including closing costs, taxes, etc.) is only around $7,000. That's a goal that doesn't seem quite as far out of reach. Click here for the entire article.

New Year, Great Mortgage Rates

As a new year dawns, we already have great news to report: Mortgage rates are at historic lows. The news on the economic front may continue to be dismal, but this is actually great news for homebuyers and homeowners looking to refinance.
The big financial headline for the first business day of the year was the release of the ISM Manufacturing index, a key economic indicator.
Numbers released today showed that the performance of manufacturing activity fell even more than expected in December. In fact, the index fell from 36.2 points in November to 32.4, its lowest level since 1980.
So what is the ISM index?
ISM stands for the Institute for Supply Management, and these numbers are released on the first business day of the month, with data from the prior month. It takes into consideration new orders, employment, inventories, production and five other indicators. And number less than 50 indicates contraction. For the entire article click here.