Home Loan Interest Rates

When buying a home, it`s very important that you be aware of what home loan interest rates are. These are rates set by the Federal Reserve that determine what interest rates you can expect to pay on your home loan. Interest rates vary depending on the type of mortgage. Traditional 30-year mortgages have a slighter higher interest rate than 15-year mortgages because it takes longer to pay back the full amount. The sooner you can pay off a loan, the more money in interest you can expect to save.

Home Loan Interest Rates in 2012

2012 is seeing home loan interest rates remain steady at a record low. This is an all-time low since the recession began in 2008 and rates this close to zero are rare in better economic times. As of now, interest rates on a 30-year fixed mortgage are at 4%. People wanting a 15-year fixed loan can expect a rate of 3.25%. An FHA 30-year loan comes with a slightly lower interest rate than the traditional 30-year mortgage and 5-year adjustable rate mortgages have the lowest interest of all at 2.125%.

So what does this all mean, exactly? If you are planning to buy a home in 2012, you can enjoy record low interest rates, which saves you money over the entire life of your mortgage. This could mean that you never have to refinance your mortgage in order to get a better rate.

Home Loan Interest Rates Beyond 2012

In fact, the Fed announced on January 25, 2012 that it would keep interest rates near zero through late 2014. That`s an extension of past projections that it would raise rates in the middle of 2013. This gives prospective home-buyers a little longer to save money for down payments while still feeling confident that they can lock in those low rates when they are ready to make a home purchase.

Since interest rates essentially act as measurements that determine how much it costs to borrow money, the Federal Reserve has to take into account a number of factors before setting the current rates. These include inflation and unemployment. In a good economy when unemployment is low, it can be assumed that the majority of Americans have a steady income that would allow them to afford higher interest rates. When unemployment is high, that simply isn`t the case. During a recession, job stability plummets and people can no longer afford to buy even the simplest things, let alone a major purchase.

Lowering home interest rates is one way of attempting to stimulate the economy and allow the business of buying and selling homes to continue. It is in these circumstances that housing becomes a buyer`s market, since homes are difficult to sell and a buyer ready with financing can take their pick of the offerings.

Home loan interest rates are at record lows. If you are thinking about taking advantage of the all-time low interest rates, think about acting before the year 2014. Use a mortgage calculator to help you determine how much of a down payment you will need to buy the home of your dreams and still be able to afford those minimum monthly payments.