Mortgage Apps On Rise As Rates Drop

But Is It A Good Time To Buy Or Refinance? Advice From Vera Gibbons

(CBS)  As the housing crisis continues, there is one silver lining: mortgages rates are dropping.

According to the Mortgage Bankers Association, last week the number of applications for a mortgage jumped 112 percent, refinance applications were up more than 200 percent and the financial industry wants rates lowered even more.

Early Show financial news contributor Vera Gibbons says this happened after rates fell to 6 percent. She says the government is pumping $600 billion into the mortgage market, buying up debt and bringing rates down. At 5 ½ percent, mortgage rates are at a three year low. If rates drop to 4 ½ percent, she says we'll see even more activity.

Gibbons says the intention of the government is to bring rates down and increase demand, activity and transactions and ultimately drive prices up.
But she says we won’t actually see any effects of this until the middle or end of 2009.

The news is great if you can get a mortgage.

Remember -- lots of applications don't make it to the closing tables.
Lending standards are very tight, so lot buyers may not have the equity they need for approval.

"If you have good credit, a low debt-to-equity ratio, and you can actually make the numbers work and you've got a good credit score, then it's actually a good time to buy," Gibbons says.

And as for refinancing?

"If you owe more on your mortgage than your home is worth, this is not for you, Gibbons warns. "If you have equity in the home - 10 % or more -- and can switch out of an adjustable rate to a fixed-rate mortgage, this would be the time to consider doing it."

But, says Gibbons, the news is a step in the right direction.