Mortgages: 2009 Advice

With all the doom and gloom over housing, you might be surprised to know that this is a fantastic time to get a mortgage. Not if you have poor credit, to be sure. But you can get a great deal on a 30-year, fixed-rate, conforming loan these days if you have a solid FICO score, a manageable debt burden, and proof positive of a reliable income.

Rates are probably headed even lower in 2009, raising the question of whether you should borrow now or wait for a better deal. The experts are sharply divided over this one. Put it this way: If you’re a gambler, wait. If you can’t sleep at night worrying that rates will go up from here, buy and borrow now.

During ordinary times, one loan is about as good as another because most lenders’ offers on 30-year loans are clustered within around a quarter of a percentage point. Not now. With the economy so shaky, lenders are all over the map in how much risk they’re willing to take in making loans. So it really pays to shop around. And keep checking, because rates are constantly changing.

Forget what you were told in quieter times about the pros and cons of fixed- vs. adjustable-rate mortgage loans. These days, all the best deals are on fixed-rate loans because that’s the segment of the market that the government has been targeting with support.

On the other hand, if you got an ARM in the past and it’s coming up on an interest rate reset, don’t rush to unload it. Short-term interest rates have gotten so low that you’re very likely to see your monthly payment fall.

Before Making an Offer, Get Pre-Qualified

Home sellers are likely to give you a better deal on a house if you’re pre-qualified for a mortgage. Why? Because it shows you can get the deal done quickly. In this market, nothing burns a seller more than being strung along by a buyer who wants the house but can’t qualify for a loan to buy it.

On the other hand, if trying to decide when to refinance, this comes down to personal risk preferences. Of course, you should also run your numbers through one of the many online calculators (a rough rule of thumb is that it makes sense to refinance if the new rate is a full percentage point below your current rate and you don’t plan to move soon).

The Federal Reserve and Treasury Dept. seem determined to force mortgage rates lower in 2009 and are bound to have their way, however, with interest rates, nothing’s for sure.

So what do you think? Pull the trigger and buy (or refinance) now, or wait? We’d love to hear your opinion. Just use the comment link below and sound off… your email address will never be published at this site to protect your privacy and your in-box.