30 Year Fixed Mortgage Rates Fall Below the 5% Mark

On January 15, the Wall Street Journal reported that the interest rate on the benchmark 30-year mortgage fell below 5%. Like most news sources, they were citing the weekly mortgage market survey compiled by Freddie Mac.

So today I went to the source and saw it for myself. Sure enough, the January 15 weekly report showed 30-year fixed mortgage rates at 4.96% (as a benchmark). Average rates in that same category were just over the 5% mark. What does this mean for consumers? Well, it could mean that now is the time to buy a home or refinance your current mortgage loan.

Should I Buy a Home?

If you have a good credit score, stable income, and enough money for a down payment, this could be a very good time for you to buy a home. I don't ever remember seeing the 30 year fixed mortgage rates as low as they are right now. So if you can qualify for the best rate a lender has to offer, you could get a very affordable loan.

Not only that, but you'll have all the benefits of a fixed-rate mortgage (as opposed to an adjustable rate). This brings financial security as well, in the form of predictability. When you get a 30-year fixed mortgage, you know that the interest rate will stay the same over the life of the loan. For a first-time home buyer, this might not seem like such a big deal. But anyone who has ever had an ARM loan can easily see the benefits of a fixed rate.

When you get a lower rate on a mortgage loan, you are essentially shrinking the size of your monthly payment. Interest is one of the key components of a mortgage loan -- the others being the principal amount borrowed, interest and taxes. So if you're a well-qualified home buyer in this market, you could get double benefits from a 30-year fixed mortgage rates being offered today. You get a more affordable loan, and you get the long-term predictability of having a fixed interest rate.

Questions you should ask:

• Do I have enough for a down payment on a home, ideally in the 20% range? If not, start saving money.
• Is my debt-to-income ratio favorable? If not, pay down your debt.
• Is my credit score good by 2009 standards? If not, focus on boosting your score before you apply for a 30-year fixed rate mortgage.
• Have I determined my home buying budget? If not, use a mortgage calculator to get a rough idea of what you can afford.
  

Should I Refinance My Mortgage?

Mortgage applications are rising, and the vast majority of those applications are for refinance loans. Why? Because homeowners can benefit from the incredibly low 30 year fixed mortgage rates as much as home buyers can. By refinancing into a lower rate, you could potentially save a lot of money over the life of your new loan.

But there's more to the process than just the interest rate. So before you decide to refinance your current mortgage into a lower 30-year fixed rate, you've got some homework to do. You must run the numbers to see if the money you save is greater than the cost of refinancing the loan.