Low Mortgage Rates

US homes are now at their most affordable prices since 1970 when the national association of realtors first began tracking home sales data. Low mortgage rates are a huge win for everybody. If you own an existing house, you can refinance and lower your monthly payment and if you are looking to buy a new house, your payment will be much less at a 5% interest rate than it would be at 6%.

This dramatic reduction in interest rates has helped spark a mild upswing in housing purchases. Right now the economy is struggling mightily  and it will not get right until the housing market finds a bottom. For the first time in over 7 months, housing sales increased. This doesn’t necessarily signal a bottom in the market, but it does show that we are getting closer to the inevitable slowest point.

There is a huge stimulus package in the works that when combined with low interest rates, should help spur an increase in housing sales across the country. Some regions will get healthier quicker and some like Florida may take a couple years before they get right. Miami has an inventory of unsold homes right now at 30 months, which means that if no houses were added to the market, then it would take almost 3 years for Miami to sell all the existing inventory.

One of the biggest issues is that even people with good credit are having a hard time getting access to the capital they need to buy a home. If you have bad credit, it is a very tough time to get a mortgage right now, the subprime market has dried up massively in the last 6 months. Low interest rates and a federal stimulus will help this market get turned around, but it will take time before things get close to what may be considered normal.

Are Bad Credit Loans Still Available?

There are rules that can help you find out if you qualify for a low or bad credit loan from a local bank. Many of the rules that banks will use are based on quanitiatve factors such as your credit score and your ability to pay down debts.

If you are considering buying a new condo, home or townhouse and you have a credit score under 600, chances are you will need to get a bad credit loan. Given the credit collapse that happened in the latter half of 2008, there is also a good chance you will be required to come up with at least 20% of the downpayment. This strict requirements freezes a lot of first time buyers out of purchasing a home, but it is not impossible. The lesson here is to save up as much money as you can so you can afford a reasonable downpayment and also get yourself a lower interest rate in the process.

In 2006, there were tons of subprime loans that were available for just about anyone that wanted one. Now here in 2009, the subprime market has dried up, so the real lesson is to try to get your financial house in order before applying for a loan.