Mauricio Navarro

Home mortgage rates are at record lows; however it is quite likely they will be going up soon due to the current mortgage environment. Because of the subprime mortgage crisis the entire financial system across the globe has been impacted. In fact, the crisis has resulted in many failures of huge companies including government sponsored entities as well as mortgage companies and investment firms not to mention tens of thousands of foreclosures. The crisis has escalated over 2007 and 2008; however it began several years ago quite slowly. This financial crisis has not only affected current home mortgage rates, but will surely change the face of lending forever.

Current mortgage rates
Mortgage rates are currently quite low making this a perfect time to buy a new home. However, buying a new home is more difficult than ever because lenders do not have the money to lend and/or they have such high lending requirements that the vast majority of potential borrowers do not qualify. Unfortunately, this combination will affect the mortgage environment even more because when banks do not lend money not only does the housing market stagnate, but it also affects daily business. In fact, the fact that banks are wary of making loans these days is unlikely to change in the near future as it is predicted billions of dollars in credit card debt will also be defaulted on soon.

How did we get here?
Those wondering how the current housing market arrived at such a state should understand that the subprime and adjustable rate mortgages were at fault for the busting of the US housing bubble. The rate of default on these loans was staggering and looking back it is easy to see where trouble was brewing. However, at the time banks had lax lending standards and were approving practically anyone who applied for a home loan with very easy terms. What happened is many individuals were approved for loans for homes that they could not afford. These individuals, as well as the banks, were confident they could easily refinance into easier terms because housing prices were skyrocketing and everyone simply ignored the fact that defaults were up and too many people were being approved for loans they truly could not afford. All of this works together to create the current mortgage market that is quite unstable.

Where to go from here
The biggest hurdle will be to get the already gun-shy banks and lending institutions to start lending again. They are too worried to loan large sums for homes when so many defaults have occurred. In fact, some major banks have failed and been bought out by other banks due to their inability to make it through this crisis. However, the only hope for banks to survive is to begin lending again. That truly is their bread and butter and without loans more banks will go under. So, what can banks do in this particularly challenging mortgage loan market?

One thing that has been done in the US is a bailout to the tune of $700 billion. This money will go to shore up the banks and allow them to begin lending again. Of course, in order for banks to begin lending again potential borrowers are going to have to offer some form of protection to the bank in the way of a substantial down payment. Those with excellent credit may be able to qualify for better terms; however most borrowers will find they are required to provide a down payment of 5 to 10% of the home's purchase price.

The home mortgage market is changing on a daily basis and most banks and consumers are hoping the worst is behind us. That is not a guarantee on the financial markets will probably be reeling for some time. However, the credit market has certainly been changed by this financial crisis.

Mortgage rates throughout the US and Canada have spiked over the over the past few months; it's a sign of the times but that doesn't mean that you have to scrap your game plan if you were planning to buy a home. A little refining of your "road to homeownership" plan might be in order though.

For instance, what was your goal for your real estate purchase? Did you plan to live in in your home or were you purchasing the real estate for an investment? Knowing this before you actually buy is key because it will affect every other part of your homeownership plan. For instance, now is a great time to get exceptional deals on real estate IF you plan on living in the home but if you don't have enough disposable income, now may not be the best time to flip real estate or to become a landlord.

Another question that you may need to consider is the type of loan that's best for you. What you originally planned for may not be the best type of loan for today's economy. For example, if you once thought that a variable rate non-conventional loan was ideal, that may not be the case anymore. With the volatility of today's economy, it may be smarter to consider a fixed rate mortgage. That way, you'll know exactly what your mortgage payments will be and can budget accordingly. Also, a short-term loan, which will allow you to reevaluate your loan in two to three years and adjust accordingly, may be a better option than a long-term loan.

In addition to knowing what your goal is and re-thinking the type of mortgage loan that is best suited for you in this economy, you should also re-think exactly how you will pay for the real estate; your original plan for accruing the monies needed for the mortgage loan down payment and closing costs may not be as feasible now as it was when you first decided that you were going to buy real estate. Did you plan on using an annual bonus from work? Were you just going to pay for the down payment and closing costs out of your savings? Maybe you thought you could afford to borrow money from a retirement account. If you planned on using equity from a current property or financial assets from previous investment, you'll definitely need to re-think your strategy based on the current and projected economy. The point is that, whatever you had in mind, you MUST re-think that decision to make sure it's still the best option, taking into account how your decision will affect you financially in the long run.

If you have asked all of the above and have reasonable responses, the next question to ask is: What's your plan for staying a homeowner or landlord once you've have successfully purchased a home? If the home will be your primary residence, you'll need to plan where the monies will come from for utilities, interior and exterior maintenance, taxes and mortgage payments. Then, figure out how to lower the costs of each of those as much as possible! If you're going to be a landlord, you'll need to not only estimate costs for maintenance and utilities but also how you'll cover the home mortgage payments if your tenant fails to pay rent. As for you investors who want to flip real estate, you'll need to budget wisely as it may take you longer than expected to sell the property. Also, keep in mind that a flip may not earn the same ROI as it would've a year ago. Therefore, do not take on a larger mortgage loan than you can truly handle. Remember: Investment property or not, the home will still be your property so you will still be responsible for everything related to owning the real estate.

The final part of your plan for home ownership that you should re-think is your contingency plan. This is critical! As stated earlier, the economy is different today than it was six months ago. A year from now, it could be significantly even more different; the economic pendulum could swing either way. Therefore, plan for the worst and expect the best. That way, you won't have anything to worry about once you get approved for your mortgage and buy the real estate you've been wanting!

Just like many things in this world, not all mortgage loans are created equal. In fact, there are numerous loan offers that you might find scouring the Internet or by visiting with multiple mortgage loan consultants. The question is: How do you determine which mortgage loans are great mortgages? Well, as the saying goes, great things come in threes...or in this case, in three steps.

The first step to finding a great mortgage loan is to hire a quality mortgage consultant. In the real estate business, that means having a mortgage loan consultant who operates with transparency so you'll know every fee that you'll be assessed and the amount of each fee. A transparent mortgage loan consultant will also explain everything-even the things you don't ask but need to know-in plain language so that you fully understand everything related to obtaining a mortgage.

The second step to finding a great mortgage loan is to find an appropriate mortgage loan. What does "appropriate" mean? It means that the mortgage consultant you've chosen to work with has located a mortgage loan that has a feasible interest rate for the payments you can afford; the lower the mortgage rate, the better. There is a catch: Mortgage loan consultants in Florida, California, New York, or anywhere else in the US can only offer you the mortgage loans that you are eligible for, which is based on the current market rates and your credit score. Therefore, be sure to keep tabs on both.

The third step is to put on a pair of mortgage loan blinders. By that, I mean you need to narrow the scope of the types of loans you'll entertain; only consider loans that are 100% buyer-friendly. Ideal buyer-friendly loans give you, not the lender or the mortgage broker the advantage. Buyer-friendly loans have flexible loan terms. For instance, the loan may be available as a one to ten year loan; it may be available as an open, closed, variable, or convertible mortgage. Another key sign of a buyer-friendly mortgage loan is that the mortgage allows you to have some control over the interest rate. If a mortgage loan consultant says that "points" is an option, it's an offer worth considering. Mortgage loan points, in case you don't know, allow you to decrease the interest rate on a given loan. Though buying points will increase your initial mortgage loan costs, it'll save you money in the long run. That's why it's a great option to have, regardless of whether you utilize it.

If you follow the steps above as you begin hunting for your perfect mortgage loan, you won't have any problems finding a loan that you can live with. Keep in mind that finding such a loan does take time. Be patient, plan ahead, and most importantly, find the right mortgage consultant or firm to help you along the way first!

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With everything that has been taking place in the past few months with mortgage giants Fannie Mae and Freddie Mac, there is no doubt that families and individuals are feeling anxious about their finances and home's futures.

The trigger of the real-estate boom that the country had been going through mostly throughout the last four to five years was due in large part to low-mortgage rates. 30-year mortgage rates went down as much as 6.32% in 2005 which made the possibility to buy property much more accessible to those who were unable to before, especially those earning low-incomes.

Ultimately however, people's finances began to spiral out of control and although home- buyers were reveling in low-mortgage rates, the real estate reality was very different.

The government take-over of Fannie Mae and Freddie Mac during the summer of 2008 was distressing at best. Neither had sufficient capital to sustain themselves throughout the crisis, consequently making a government take-over necessary. Both Fannie Mae and Freddie Mac control ½ of United States mortgages and the take-over consequently drove rates down a staggering 6.2%. The real estate bubble burst and people were seen dealing with sudden and unexpected foreclosures.

The question now is: How does the housing market look now? Will low mortgage rates continue and for how long? As of last week (the week of September 15), home mortgage rates had fallen to 5.78% down from the previous week's 5.93% which motivated a significant amount of buyers to apply for loans. The 15-year fixed mortgage rates are now at 5.35% while one year adjustable rates are at 5.03% (source: iht), making low-mortgage rates likely to continue.

Despite these low-mortgage rates, the housing market is not likely to look much better in the near future. According to the National Association of Realtors, the median national home price went down 9.5% to $203,100 indicating that people are now more reluctant to apply for loans because of the current financial crisis the country is facing.

The U.S. government is now seeking to pass a $700 billion financial package that would bail out financial institutions in peril, but if passed, that does not mean that the housing crisis is going to fix itself over time. Though low-mortgage rates exist now, rates continue to fluctuate and can by no means be considered "stable." As long as investors continue purchasing bonds, investors will be less reluctant to keep interest rates down.

As long as you, or anyone else wishing to apply for mortgages has a good credit history and a record of paying on time, then the eligibility to obtain loans will be more likely. Due to the current economic crisis though, banks will be much more careful in handing out loans. Obtaining credit will require a much more careful examination of records which in turn will affect the housing industry despite the low-mortgage rates being offered. People affected may include younger individuals wishing to purchase property or those in general who have never bought a home before. In the end, the better credit report, the more favorable rates for your home will be given.

Low mortgage rates are not only an American issue though. They are seen overseas in places such as England where approval rates are increasingly more difficult to obtain as banks there have seen the crisis in the United States and are now more cautious in how they themselves handle their housing market which has also been seen in the world's second largest economy, Japan.

Despite the rates maintaining themselves relatively low, some prefer to wait for rates to dip even lower as is the case in Hawaii where even though mortgage and interest rates are low now, the fluctuation in rates cause people to believe that better rates are yet to come . These cases are not only seen in Hawaii though, but throughout the rest of the country as well.

Wherever home buyers may be, the outlook for mortgage rates remains uncertain because of the changing regulations banks are now going through as a result of the problems the home markets have gone through as well as the rise in foreclosures people are now seeing in their own communities. It is ultimately up to the buyer along with the sound advice of their banker that a decision on buying a home should be taken. Only then should a choice be made because the long-term consequences may not only be damaging to the individual, but as seen by today's current crisis, everyone else who may own a home as well.