Mortgage Moping: Get Over It

For example, award-winning analyst Richard Bove of investment banking firm Landenburg Thalmann issued a report in which he claims that the following factors will initiate a real estate recovery, starting in 2009.

• Government intervention has pushed mortgage interest rates to 50-year lows--under 5% for 30-year loans, and even lower for 20- and 15-year terms.
• Mortgage lenders are experiencing very high home loan application volume, mostly for refinancing but also for purchases as bargain hunters snap up distressed properties, bank-owned foreclosures, and short sales.
• House prices are stabilizing in many parts of the country. The latest Federal Housing Finance Agency index found home prices UP in the mountain states and in New England.
• Gas prices as well as those for good and services have declined sharply. People have more money to spend.
• Americans have cut spending and begun saving. The national savings rate improved by 3% last month.
• The anticipated massive economic stimulus package is expected to put more Americans back to work, causing housing prices to "stabilize and / or rise" in 2009.

Help and Hurdles for Home Buyers

And don't forget government incentives for first time home buyers, like a $7,500 tax credit, designed to get more people buying and more homes off the "for sale" lists. If you've got the down payment or equity, a good job, and a nice credit report, you won't find a better deal on a mortgage than a Fannie Mae or Freddie Mac home loan today. But start looking quickly--analysts are widely advising clients in escrow to lock their rates, the consensus being that interest rates are unlikely to go lower. One down side: if you don't have a healthy down payment, conventional loans have higher fees and are harder to get, requiring pristine credit reports, stable job histories, and bigger paychecks.

Your Next Home Loan: Be Unconventional

However, FHA is going strong--you only need about 3.5% of the cost of the house to get your FHA mortgage, and your credit report doesn't have to win beauty contests. Interest rates are low, too--nearly as low as for conventional loans. For qualifying veterans, VA loans require no down payment at all. And there are other helpful programs many don't know about. For example, over half the nation's population lives in areas designated "rural" by the feds. People who buy in "rural" areas can qualify for 100% mortgage financing. Others may be eligible for community homebuyer or down payment assistance programs.

Unleash Your Bargaining Power in a Buyer's Market

There are many ways to negotiate lower prices in today's softer markets with motivated sellers. According to the Federal Housing Finance Agency, US housing prices fell 7.5% between October 2007 and October 2008. Of course, your bargaining power depends on the conditions in your local market. And you always put yourself in the strongest position by having your financing lined up before exploring the market.

Those looking for the deepest discounts should explore the distressed property market. Most lenders with property on their books don't want the expense of rehabilitating and managing it, and most have specific policies about how low they will go in negotiating short sales. Use agents experienced with these transactions; they know what lenders will accept. In addition, be prepared to go through the process repeatedly, because over 66% of short sales fall through.

For buyers who prefer direct purchases and want to avoid the risks of distressed property, there are still ways to make a good deal. Luke Mullins at US News advises that you research sales within the area you want to buy, know how long your target property has been on the market, and determine how much you can get away with offering. It's important, he says, not to "try to steal a home." If your offer insults the buyer, he won't want to sell to you. In addition, Mullins warns against buyers getting too emotional, "so enmeshed in the negotiation game that they lose a house they like and can afford." So look at your numbers and be smart--there doesn't have to be blood all over the floor for you to get a good bargain.

Adversity's Partner: Opportunity

Consider history. Many great American families, household names today, became filthy rich in the aftermath of the Great Depression. They spied opportunities and made their moves while everyone else remained paralyzed with fear. Few times in history have offered the combination of bargain-basement prices, top-drawer selection, and give-away interest rates. Check out current home prices and mortgage interest rates in your area and see if it's time to make your real estate investment.