Freddie Mac announced Thursday morning that 30-year fixed-rate mortgages hit a new record low of 3.4 percent this week, dropping from last week's record-tying low of 3.49 percent.
That wasn't the only mortgage product to hit a new low, however. Every other mortgage product surveyed by Freddie Mac dropped to a new low this week except the 5-year adjustable-rate mortgage.
What's behind the most recent dip? It could all be tied to the recent Federal Reserve announcement that it would launch a third round of quantitative easing by buying $40 billion of mortgage-backed securities on a monthly basis until it felt the job market had rebounded sufficiently.
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"Fixed mortgage rates continued to decline this week, largely due to the Federal Reserve's purchases of mortgage securities, and should support an already improving housing market," said Frank Nothaft, vice president and chief economist, Freddie Mac. "Additionally, new home sales in July and August had the strongest two-month pace since March and April 2010."
Of course, just because mortgage rates are at record lows doesn't mean it's necessarily the right time to buy a home. There are a few things you need to consider, like whether the homes you can afford are worth the price right now and also if you can afford the new cash expenses of home ownership like insurance and taxes.
Also, just because the average mortgage rate is at 3.4 percent doesn't mean that you will be able to qualify for that rate. As previously reported, lending standards in the mortgage market are extremely tight right now. Bad credit can keep you from homeownership all together, not just the best rates. If you want to find out how to improve your credit to qualify for a better loan, check out these tips from Gerri Detweiler or get your Credit Report Card and see how you're graded on different aspects of your credit score.
If you're looking to refinance, however, the newest rate drop could be a great opportunity. Refinancing your home loan does not have a significant impact on your credit score in the short term, but could have a large impact in the long term if you don't handle the new loan agreement properly by making on-time payments.
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