The recession is coming to an end and many blame it on the ARM loans that were issued to those poor victims that simply didn’t read the terms on their loan documents, we have discussed over and over who is to blame for this recession and the fact that ARM loans are simply not at fault. It seems that the general public however is starting to agree with me as ARM loan sales are up and the rates are better than ever.

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The Stimulus Program will benefit the poor first and foremost. President Obama signed the $787 billion economic stimulus bill into law on Tuesday, February 17, 2009. This historic rescue package is just one of a raft of recovery measures the new administration is introducing in an attempt to get the economy on its feet again as quickly as possible.

For sure, the stimulus package is the product of much compromise and wrangling in Congress, and it’s far from perfect. A lot of the infrastructure spending provisions will take months or even a year or two to implement, and might not start generating jobs, spending and other economic activity until the recession is already ending.

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The housing market is bad, the credit market is frozen, and your home is probably worth half of what it was 3 years ago. Let’s look at what has changed in the past year around refinancing rules and if it right for you.

In the past, many of us were allowed to buy homes for special $0 down programs, like the 80-20 or the 80-10-10 (80% first loan, 10% Line of credit and 10% down). These programs were meant to avoid paying Private Mortage Insurance (PMI) while putting 0 to 10% down. Well those days are over, most purchases require 10% down with PMI or 20% down. Who qualifies also changed as the credit markets froze over, 3 years ago a 680 credit score was considered golden, now 750 is considered good.These small changes have truly made it difficult for new home purchases which has left the home market down for the past two years. Since people are not buying the great homes we are selling, we are left with refinancing as our only option for some time but the rules have changed there too.

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Many homeowners are asking themselves if they should refinance or not. Lets take a moment to understand why the interest rates are so low and why they will remain low for some time and lets try to predict how low they will go.

The feds recently lowered their rate to a historical low. Fact!

The feds will keep the rate low for at least 6-8 months. Prediction!

The feds were hoping to make loans affordable. Fact!

This has worked well in getting people to refinance. So far fact!

The mortage rates on the 30 yr fixed has come down. Fact!

The rates will keep going down, under the 5 % mark on the 30 yr. Prediction

The feds tried to start something and so far it seems like it has worked, the fear over the variable rates has taken over even the smartest people, and everyone is trying to get out of those adjustable rate mortgages with the fear that the market will keep declining and this might be their only chance to refinance.

With fear, as always, the volume of things multiplies and therefore the volume for refinance do as well, with everyone trying to refinance, and even in some cases give cash out of pocket to qualify, this gives an opportunity to banks to push the lending piece forward, take bad loans off their books and creates income as well for them through closing costs and points.

So we are now faced with the question: is this the right time?

If you ask me, I say wait a few more weeks but keep a close eye on the rates and the different lenders, I would also look at the 5/1 adjustable rate mortgage, it is a great product and the market will adjust in 5 years. But again, you can play it safe and stick to the 30 yr, but I am pretty confident that it will drop under 5% with no point very soon.

Before we start discussing which mortgage is right for you, we must understand the different types of loans available, how they work, and who they fit.

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