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Lower Mortgage Rates May Help Real Estate Market to Rebound

Despite the fact that home prices have been falling for some time, many buyers have remained reluctant to seize the home buying opportunities that abound. As current mortgage rates fall to even lower rates, it is anticipated that this could be just the stimulus that is needed to encourage more home buyers to purchase home and existing homeowners to refinance that current mortgages.

The national average of fixed rate 30 year loans has fallen below the 5% mark for the first time in more than 30 years. It is widely anticipated that this will be a pick-up that the market desperately needs.

For awhile now there has been rampant speculation regarding when exactly the real estate market would hit bottom. The fact that it has been in what seems to be free fall led many to speculate that the end might not have been yet reached. Consequently, a large percentage of home buyers have been sitting back and waiting. The proverbial fence has become quite crowded. Others believe that 2008 was the much awaited bottom and that the coming year could mark the rise many have been waiting for.

Certainly, there have been signs which would indicate this could be the case. In November of 2008, real estate sales dropped nearly 30% from the previous year. The following month, sales experienced a slightly rebound and even found a nominal year over year gain.

In addition, the values for homes remained fairly stable over the course of the last near. The median home price was just under $120,000 across the country. The fact that prices seem to be stabilizing combined with lower interest rates may be enough to spur many home buyers to snatch up deals before the housing market begins to experience a true rebound.

There are even some experts who are predicting that lower mortgage interest rates could actually cause an upswing in prices. A number of lenders are reporting a spike in the number of people who are calling to become pre-qualified for mortgage loans. Traditionally, when mortgage rates begin to fall, home buyers have been able to purchase more home without spending any more money. While a 1% drop might not sound like much, it can make a tremendous difference in terms of monthly mortgage payments.

At 6% a home buyer would be able to afford a $100,000 home and keep the mortgage payments at around $600. If mortgage rates drop by a percentage point, that same home buyer would be able to purchase a home in the $115,000 category without spending hardly any more money per month on their mortgage payment. 15K might not sound like much to some, but in some markets it could be the difference between another bedroom or some other amenity that a buyer wants in a home.

The lower mortgage rates are not only attracting home buyers but homeowners who are looking to refinance as well. There are certainly numerous advantages to refinancing a home loan. Homeowners who once thought they had a great deal with a 6% mortgage rate are now seeing that they might be able to drop their mortgage rate to below 5% and save money on their monthly payment or pay off their home sooner. There are also those homeowners who are looking at refinancing their homes at a lower rate in order to pay for remodeling or to consolidate debts using the lower mortgage rate.

Both homeowners as well as buyers need to keep in mind; however, that although mortgage rates have dropped, lending restrictions have tightened. There are simply too many lending companies who got burned with subprime loans and who are being far more cautious regarding loan approvals.

This does not mean that mortgage loans cannot be found, but for the most part, applicants will need to go through more hoops and provide more documentation in order to be approved than would have been necessary in the past (Tips: Home mortgage loans - They're increasingly difficult to obtain). Banks are still interested in doing business with applicants who qualify but they are also anxious to make sure that the people they do approve for loans will be able to repay them. As a result, consumers who are anticipating making a mortgage loan application in the near future would do well do make sure they have all of their documentation in order before submitting an application. This can greatly help to reduce the amount of time that it takes to review an application for approval as well as possibly assist in the entire approval process.

Ultimately, it will be some time before we know whether the drop in mortgage interest rates will really fuel the upturn the real estate market needs, but it certainly looks like there has never been a better time to buy.



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