Mortgage rates fall for week of September 27, 2010

Mortgage rates are slipping to record lows, while concerns over employment, the economy, and housing markets are keeping borrowers at bay. Meanwhile, rock bottom rates are making mortgage loans more affordable.

How low is low? No matter how you answer that question, last week's rates fell to record lows. HSH Associates reports that average combined rates for mortgage loans fell as follows: The rate for a 30-year FRM fell by 5 basis points to 4.70 percent; the 15-year FRM saw a dip of 4 basis points to 4.18 percent. Average combined rates for a 5/1 ARM provided a fantastic deal with rates dropping from last week's 3.67 to 3.61 percent.

Mortgage loans: Existing home sales increasing

BusinessWeek reports that existing home sales increased by 4.3 percent in August, the second consecutive monthly increase in sales of previously owned homes. Although this bodes well for the stability of the US housing markets, the increased demand for mortgages could also signal that mortgage rates could soon be on the rise. The laws of supply and demand typically suggest that prices rise as demand increases. The national unemployment rate remains near 9 percent, which may offset a speedy housing recovery as wary consumers avoid taking on long term debt during tough times.

Prepare for mortgage loan shopping: Your A-1 strategy

Before shopping for a home, or contacting mortgage lenders for quotes, make sure your financial house is in order. Eliminate credit card debt, avoid opening new consumer credit lines and establish a savings account dedicated to your down payment and closing costs. Order your credit scores and evaluate your credit information for ensuring that there are no errors or misinformation impacting your scores. You'll likely need FICO credit scores of 720 or more to qualify for favorable mortgage rates.

Only you can know when it's the right time to buy a home or refinance your existing mortgage loan, but taking time to improve your credit and show your financial profile in its best light can help you save on mortgage rates. Mortgage interest adds up to thousands of dollars over time, but don't forget to factor in mortgage closing costs as an offset to potential interest savings when refinancing.

Our live database of current mortgage rates can help you find the best mortgage rates in your area.