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Mortgage Rates Fall From News of Fannie And Freddie Mac Bail Out

By Erik Folgate

Fannie and Freddie Mac mortgage companies may be worrying Wall Street, but they’re woes have given a gift to those looking to buy a house. On Monday, the prime mortgage rates on a 30 year fixed mortgage dropped from approximately 6.5% to 6.0%, and it has since fallen to about 5.75% throughout the week. The reason is that the mortgage rates sometimes fall in lieu of bad market news such as the Freddie and Fannie trouble and a turbulent market. I didn’t write this article in the beginning of the week, because I wanted to see if the drop was a fluke or not. It looks like these low rates are here to stay for a little while.

Some questions to ponder…

Should you refinance your house? If you are currently paying an adjustable rate mortgage on your house, I would definitely recommend refinancing to a fixed rate mortgage. You’ll lock in a great, low rate, and you’ll have the peace of mind that the rate is FIXED for the life of the loan. If you currently have a fixed rate mortgage, you need to do an analysis about whether it’s worth it or not to refinance for a lower rate. If you refinance, you have to pay closing costs again, and some lenders will charge you a point of origination or prepaid interest to refinance. If you currently have a rate in the 6’s, I wouldn’t refinance. It would take you about 5 to 7 years to make the savings worth it. If you’re pretty confident that you’ll be in your current home for 10 years or more, than refinancing might be worth it. If you’re rate is in the 7’s or 8’s, then I would DEFINITELY look into refinancing to a lower rate.

Should I Buy A Home Right Now? Don’t ever buy a house just because the interest rates are low. However, if you were already thinking about buying and you have the means/cash to do it, this is a great time to buy. The housing market is hitting the trough, so prices won’t get much lower than this. Couple that with an extremely low mortgage interest rate, and you get a prime time for first-time home buyers and families looking to move up to a bigger house. But remember, buying a house is a huge endeavor. Don’t get lured into low interest rates and great deals on a home. Only buy a house when you are financially ready to do it. People buying for the sake of buying is the reason the housing market is in this current mess.

I’ve been reading a few blogs here and there about the Fannie and Freddie bail out, and most of them are dead on about what it means to us. The government is bailing them out with OUR tax money, and it’s not right. The government shouldn’t be coming to the rescue every time a large private company comes into financial distress. How come we don’t have any confidence in the free market system, anymore? Let the free markets correct themselves. The government wouldn’t need to increase the federal deficit, and corporations will learn their lesson. Hey Congress, stop enabling the private sector!

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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