Mortgage interest rates are still at historic lows. By historic I mean they have never been lower since they began keeping track. It is expected that rates will continue to remain low for at least another year. What low interest rates mean to homeowners are locked in low payments for 30 years.
Just a few years ago rates were at 6.5%. On a $400,000 mortgage that would mean monthly payments of $2,528.27. Now that same mortgage at 4.0% has monthly payments of just $1,909.66, a difference of $600 per month. It sure sounds like there’s never been a better time to buy a house than now.
Not only are interest rates low but home prices are also still low. There are still countless foreclosed homes being auctioned off by banks and countless other homeowners trying to unload homes they can no longer afford. This means the market is saturated with houses. Too much supply and too little demand drives prices down.
Qualifying For A Mortgage
So even though it is a great time to buy a house, homes are still not selling. The reason is because not too many people can qualify for a mortgage. Banks are not handing out loans like they used to. They too have been hurt as many have stopped paying their mortgage, leaving the bank with a home that will sell for much less than what they are owed.
At some point, perhaps in the very near future, things will begin to pick back up again. There has to come a time when house prices hit far below market value and interest rates hit the bottom. Hopefully by the time that happens Americans will be in better financial shape to purchase a home so we can get this economy back on track.