Mortgage shopping? Rates are looking much better

Up until about a week ago, it was pretty much impossible to find a 30 year fixed mortgage rate much lower than 6.375 percent. Mortgage rates declined on Monday and Tuesday of this week and now rates in the 5's are common. Bankrate is reporting an average rate of 5.88 percent and brokers in the area are reporting some rates as low as 5.75 percent.

The government's bailout of Fannie Mae and Freddie Mac is believed to be responsible for the decline in rates although experts appear to have been caught off guard by the magnitude of the decreases. Whatever the reason, this is great news for new home buyers and people looking to refinance. The drop in rates from 6.375 percent to 5.875 percent would translate to savings of $100 per month on a $300,000 30 year fixed rate mortgage. Not a gigantic difference, but every little bit helps.

Many experts are predicting that rates could drift still lower over the coming months so it will pay to shop around and compare several lenders. When comparing lenders, don't forget that the fees charged can be just as important as the rate. Be sure to ask what kind of fees will be incurred and don't be afraid to ask for lower fees. Also, if you will be putting down less than 20 percent of the purchase price of the home, you will be required to pay Private Mortgage Insurance (PMI). If you are anywhere close to a 20 percent downpayment, stretch a little to get over the 20 percent.

Finally, remember that lending standards are still very tight so while the rates have improved, it may still be difficult for some people to qualify.