Yes, that’s right.  If you are a First Time Homebuyer and were hoping to get a great deal on a home, but can’t buy till this fall, low mortgage interest rates are good news.  It seems the weak economy, the stalled housing market and the European fiscal crisis are all GOOD news for home buyers.  Because job creation is lagging behind the economic recovery, many areas of Minnesota still have high unemployment.  This translates into home foreclosures as the unemployed struggle and lose the fight to keep up with mortgage payments.  Foreclosures keep home prices low as banks use fire sale pricing to get rid of them.

The housing market took a dive after the end of the special home buyer tax credits.  These special tax credits ended on April 30 and May was a dismal month for home sales.  As home sales slow down, home owners become more motivated to discount their homes’ prices.   We expect to see more advertised low prices over the summer and into the fall.  One report that I read said the Twin Cities was one of the worst areas of the country, better only than Los Vegas, in terms of dropping home values.

The European fiscal crisis has made Wall Street very nervous.  If the European economy goes into a recession, that might stall the United States recovery.  During times of Wall Street panic, the bond market typically does better than the stock market.  Mortgage money is financed through bonds.  When bond sales are good, there is more mortgage money to lend at lower interest rates.  Thus, most experts agree that we will see spectacularly low rates through the end of 2010 and maybe even into 2011.

So… lots of homes on the market at low prices and low interest rates on mortgage money.  Sounds like a buyers’ market to me.  Be sure and plan to take advantage of the great affordable housing out there this year before the ecomony gets back on its feet and these bargains disappear.

For answers to your mortgage and home purchase questions, attend our FREE FIRST TIME HOMEBUYER CLASS offered monthly in the Twin Cities metro area.

When you make your monthly house payment which repays your mortgage loan, interest will be the biggest part of that payment.  Interest rates make a huge difference in the size of your house payment.  Look at the table below:

5% interest on $200,000 mortgage over 30 years:  principal/interest payment $1074.

6% interest on $200,000 mortgage over 30 years:  principal/interest payment $1200.

7% interest on $200,000 mortgage over 30 years:  principal/interest payment $1278.

So it’s important to qualify for the best interest rates.  Most home buyers don’t know that when you apply for a mortgage, you may not be receiving the best interest rate on your loan.  If your credit isn’t good, the bank will penalize you and quote you a higher rate for your mortgage. 

If you are borrowing money for a mortgage and you don’t have 20% towards the down payment, you will also be paying for insurance on the loan called mortgage insurance.  Your mortgage insurance rate is a percentage of the loan amount divided by the 12 monthly house payments.  It is added into the house payment.  If your credit is poor, the mortgage insurer will charge you a higher rate as well.  Higher interest and higher insurance rates will mean a higher house payment.  It’s worth your while to repair your credit and make sure you qualify for the best mortgage.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.