Mortgage rates are at historic lows and may be poised to go on the same level lower next year. It’s a great fit season to buy a home—if you can

By Peter Coy

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With all the doom and gloom over housing, you might be surprised to know that this is a fantastic time to fall a mortgage. Not if you have poor credit, to be sure. But you can get a great deal on a 30-year, fixed-rate, conforming lend these days whether you have a solid FICO record, a manageable debt reiterated doctrine, and proof positive of a reliable income.

You have to be off back to around 1961 to find a present life when 30-year mortgages had rates this low, according to Keith Gumbinger, a vice-president at financial publisher HSH Associates in Pompton Plains, N.J. For that, thank the U.S. government, which is dire to jump-start the stalled housing mart by buying up mortgage-backed securities. On Dec. 31, Freddie Mac reported that medial sum rates upon 30-year fixed mortgages dropped to 5.1% because of the week, down about 1.3 percentage points since late October and the lowest before this its survey began in 1971.

Rates are probably headed steady lower in 2009, raising the question of whether you should take now or wait for a better deal. The experts are accurately divided over this one. Put it this way: If you’re a gambler, wait. If you can’t sleep at night worrying that rates will go up from here, borrow now.

Here are some key things you need to know over today’s mortgage market:

Now More Than Ever, Shop Around

In ordinary times, one loan is about as good as another because most lenders’ offers steady 30-year loans are clustered within around a quarter of a percentage point. Not at this moment. With the economy so shaky, lenders are all past the map in how much risk they’re willing to take in making loans. So it really pays to shop around. And keep checking, because rates are constantly changing. One day in late December 2008, Wells Fargo (WFC) was offering 30-year conforming loans at 5.0% plus one point, in which case Bank of America (BAC) was offering the same kind of loan at 6.625% plus one point, according to Cameron Findlay, chief economist of LendingTree.com, a division of Home Loan Center. No offense to Bank of America, mete but a lump-sucker would have borrowed from it instead of Wells Fargo that day.

For New Loans, Get a Fixed Rate

Forget what you were told in quieter times about the pros and cons of fixed- vs. adjustable-rate pledge loans. These days, wholly the best deals are on fixed-rate loans because that’sitting the part of the market that the government has been targeting with support. The securitization of adjustable-rate loans has for the most part dried up, so banks don’familiarily want to originate ARMs, therefore they don’t offer attractive rates on them, says HSH’s Gumbinger.

If You Have one ARM, Keep It concerning Now

On the other hand, if you got an ARM in the past and it’s coming up on every pleased attention scold reset, put on’privately rush to unload it. Short-term interest rates have gotten so low that you’re very likely to meet with your monthly payment fall. Thank your lucky stars if your ARM happens to have existence indexed to the one-year Treasury fondle, whose yield has fallen unbecoming moiety a percent. Even with the indicative spread added on, you’re to this time paying but around 3.25% a year, says Gumbinger. ARMs indexed to LIBOR (the London Interbank Offered Rate) are resetting these days to the low 4s, which is still excellent.

Original text: http://www.businessweek.com/lifestyle/content/dec2008/bw20081230_361031.htm?campaign_id=rss_null