Take Advantage of Low 30-Year Fixed Rates

Are you looking to buy a home?  You are actually at a great advantage now, despite all the horror stories on the news every night. The astounding number of foreclosures across the country has forced the government to find ways to stimulate the economy. One of the major benefits for buyers in the market today is the low 30-year fixed rate.

Recently, 30-year fixed rates dropped to the lowest level in the last four years. The average fixed mortgage rate in the final weeks of January 2008 was 5.48%, marginally above 2004's low of 5.40%. This marks the third consecutive week that 30-year fixed rates were below six percent.

In a battle to combat a recession, the Federal Reserve implemented key interest rate cuts.  This has been one of the main factors in the drop, along with a further weakening of the economy. It is hoped such a large drop in rates will spur more people to buy homes, whether new or existing.

For current homeowners looking to refinance, the current low 30-year fixed rate is the perfect opportunity. With so many in foreclosure peril from adjustable rate mortgages, homeowners are looking to save money and lower payments.

The advantages of a 30-year fixed rate are obvious. While the payments initially may be more than an adjustable rate mortgage, the fixed nature of the mortgage will keep payments steady. When adjustable rates balloon, as they have recently, the fixed rate will remain the same. Also, the early payments of a 30-year fixed rate loan are primarily interest, which is tax deductible. Monthly financial planning is easier when you know what each payment will be.

One of the cons of a 30-year fixed rate is higher interest. With a 15-year mortgage, payments are much higher but interest is significantly lower. Also, without a down payment, mortgage insurance is usually required. This adds a small amount onto each payment until a percentage of the principle has been paid, usually twenty percent. After this the private mortgage insurance (PMI) is no longer required. If you have PMI in your mortgage payments, be sure to notify the lending institution when you have paid off that percentage of your property. Otherwise they may continue to charge you for it.

Though there are some slight drawbacks associated with a 30-year fixed rate mortgage, they are generally a homeowner's best bet. Some studies have shown homeowners saving money on adjustable rate mortgages, but these are rare cases. Especially with the current economic uncertainty, a 30-year fixed rate is a reliable constant.

Lending institutions have varying interest offers. Many Websites report on the current rates offered by large lenders. A good site has no direct connection or interests attached to any of these companies. Be mindful of any sites that offer advertising for any financial institutions.

With smart shopping, it's a great time to find a home with the current 30-year fixed mortgage rates. The housing situation will recover, and the rates will go up. So take advantage of this time to buy your dream home or refinance your existing property. Visit our mortgage broker website at http://www.ventureloanapp.com

Minnesota mortgage broker makes an attempt at explaining complex economic variables.

I am writing this tonight to make you aware of a HUGE opportunity that I perceive in the mortgage market to refinance.  This is called turning a lemon into lemonade.  You might have noticed that the DOW backed off it's high of about 14K to about 12K as of Friday January 18th.  So while we are all losing a ton of money in the market, we can take solace that the trade-off may be a lower cost of borrowing on our debt instruments.  If you have an adjustable rate loan, think about turning it into a fixed rate soon.  In the past week, I've seen rates drop almost 1/2 percent on 30 year fixed rate loans.  In Minnesota, depending on your loan to value, property type, and credit score it may be possible to obtain a  30 year fixed rate mortgage as low at 5.375%.  Maybe this will be the catalyst to kick start renters into becoming buyers.

Today was Martin Luther King day, so the US markets were closed.  In Asia and Europe today, stock markets had a one day drop that we haven't seen since 9/11.  What does this mean for tomorrow?  FEAR is in the air.  The future markets are indicating that the US stock market will follow suit, and drop precipitously.  This of course may or may not occur, as I am writing in advance of tomorrow.  I won't give you advice on what to do in the stock market, other than to indicate that I'm staying the course with my portfolio. Eventually GREED will return to the market.  When that happens, money will flow out of treasuries and mortgages and into the stock market.  When this happens, mortgage rates will increase.  See how the pendulum of fear and greed rule the financial markets?

Let me attempt an explain of the economics behind the recent mortgage rate drops.  We are seeing the affect of huge stock market volatility.  When investors fear the market, they take flight to the 10 year US Treasury notes.  This is a typical benchmark of which mortgages are priced off of.  So, if there is more demand for the safety of bonds and mortgages, the price of these debt instruments will generally go up, which means their yield will go down.  When yields drop, so do the interest rates on the pricing of new debt instruments.  So, the offset to stock market volatility can be lower mortgage rates.  Will this be the silver lining to our current economic problems?  Trillions of dollars of Adjustable rate mortgages NOW have the opportunity to convert their mortgages to fixed rates that are very close to the initial rate on their ARM.  This means the payments might not be that different from which they have become accustomed.  This should help slow the rate of foreclosures as their home remains as affordable as it was when they bought it. 

There are variables to consider too-the federal reserve "imminent" rate cut and the stimulus package that was just proposed.  The rate cut will lower the cost of lines of credit, credit cards and other variable rate debt tied to indexes affected by the rate cut.  This will put more money in the pocket of the consumer and hopefully the economy, which in turn reduces the chances of a recession.   The collective effect should act as a multiplyer, i.e exponential effect. 

Approximately one month ago we had the Mortgage Forgiveness Act of 2007.  Most recently we have the proposed stimulus package and yet another rate cut.  The government is trying.  For some it's not enough.  For others it's too little too late, and for others it's too much.  Regardless of where you sit on that spectrum, action is being put into place.  Let things play themselves out.  Remember a rate cut, new tax law or stimulus package take time to reverberate throughout the economy.  It won't be immediate.  At the same time, I highly recommend you grab this window of opportunity and get a low interest rate on your mortgage if you can.  Visit us online at http://www.ventureloanapp.com