Home Sweet Home: Homeowners Get Fiscal Helping Hand

(Oct. 22) - For the past year, the mortgage market has taken aspiring homeowners for a ride more dizzying than a Tilt-a-Whirl. Foreclosures have been epidemic, and interest rates have skyrocketed. In recent months, the market looked like it was staging a comeback, thanks to a drop in mortgage rates and new legislation that helped borrowers refinance even when their homes had lost value.

But these much-needed financial breaks appeared temporary -- in mid-October, rates inched back above 5%, and mortgage applications plunged almost 14% over the previous week. Low interest rates help both buyers and owners hoping to finance or refinance. The 30-year fixed-rate loan inched up to 5.07% from 5.02% this week, which is still historically low.

Interest rates had been declining steadily since August, down to 4.92% on 30-year loans and 4.37% on 15-year loans, with fees averaging 0.7 percent. Such low rates enticed new homeowners to get in on the game, but the federal Making Home Affordable plan also helped money-losing homeowners like Rebecca Schreiber get a slice of the action, too.

"Our home value dropped $100,000, and then we watched it drop another $40,000," says Schreiber, a certified financial planner based in Silver Spring, Md. "We figured that there would be no way to refinance, but we qualified for this program and ended up lowering our payments by about $400 a month. I'm pleased as punch."

For those who meet the eligibility requirements of being current on their mortgage payments and owing less than 125 percent of their primary home's value, the legislation can mean saving thousands per year.

But today's low rates are already inching north and probably won't stay low for long, says David Wind, president of Guaranteed Home Mortgage Company, based in White Plains, N.Y. "We anticipate that the rates will stay attractive for the next three to six months," he says.

A few tips can help homebuyers and homeowners get the best deals.

Boost your credit. Before heading to a lender, examine your credit report, and then ask for help if it needs improvement. "If someone is interested in getting a loan or refinancing, they'll have to have a FICO score of 660 or better to be a good candidate," says Wind. "If their score is too low, they might want to see a credit-counseling service."

Be persistent. Meeting loan qualifications is only half the battle. Conquering the paperwork is the other. "I called two and three times a day to get my lender to process the paperwork," says Schreiber, the Maryland homeowner. "The pleasant persistence paid off. I'm actually using the savings on the refinance to pay off a second loan."

Mind the requirements. Those relying on the Making Home Affordable plan for refinancing help should note that eligible candidates must be refinancing their primary home, have a loan owned or guaranteed by Freddie Mac or Fannie Mae, and show evidence that they can reasonably make new mortgage payments.

Christina Couch is a freelance writer based in Richmond, Virginia. Her work has appeared on AOL and in Wired, Entrepreneur, The Christian Science Monitor, and other publications.