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I've been inundated by calls the past two days - some folks are convinced the 30-year fixed rate mortgage will drop to 4.000% and others are convinced it already has.

As Sportin Life said in Porgy & Bess: "It ain't necessarily so..." The rate dropped by about 0.125% Thursday morning (March 19th) and, in the afternoon, bubbled back up to it's original position - about 4.875% for the "wholesale" or "par" rate. And Friday, well it's Friday, and the rates nudged down even farther.

Where that rate goes over the next few days is anybody's guess.  Should it go lower?  It should.  But don't ask when it will go lower and how low it will go with any expectation that you'll receive a definitive answer from any source.  My guess (and it really is just a guess), is that the latest intervention on the part of the government will drive the rates down no lower than 4.500% and that we’ll see that actual bottom no later than Tuesday of next week – March 24, 2009.

However, there are a couple of variables that you have to mix into your mental processing:

• The “par” or “wholesale” rates quoted above are for folks who:

        - Have excellent credit (FICOs of 720 and above);
        - Are borrowing no more than $417K;
        - Will have a loan-to-value ratio of 80% or less;
        - Are not interested in cashing out equity; and
        - Don’t wish to have an “interest only” loan.

And, yes, there might additional exceptions or other limiting factors I haven’t mentioned.  And, even if you “fall outside the box,” you may be able to take advantage of the lower rates.  And, what’s the best course of action?  Give us a call, and we’ll quickly evaluate.

• If you have an opportunity to obtain a rate of, 4.875% right now, should you roll the dice and wait for rates to drop? The question to ask: is it worth the chance you take to wait for the lowest possible interest rate? It will help if you “do the math.”

- A $100K loan at 4.875% 30-year fixed rate will require a monthly principle and interest (P&I) payment of $529.  That same loan at 4.500% will require a P&I payment of $507.  The monthly difference is $22 and, in five years, a saving of $1,858 in interest.

- At the high end of the range of loan amounts is the $417K loan.  At 4.875% the monthly P&I is $2,207.  At 4.500%, the payment is $2,113.  The monthly difference is $94 per month and, in five years, a saving of $7,748 in interest.

-  Keep your eye on the prize.  Look at your current situation.  If you’re currently paying 5.875% (or more) for $100K worth of loan, you're living with a monthly payment of at least $591.  If you're at the upper end of the spectrum with a loan of $417K, your monthly payment is  $2,467 (the payments are probably higher since the original balance of the loan was likely more than the current balance).  Keep your  eye on the prize - you need to move away from that higher interest rate if you'll be in your home for at least the next five years.  Which of the two lower rates we've discussed?  Does it really matter?  Keep your eye on the prize - Get Rid of that higher interest rate!