"How many billion?" That’s what millions of Americans were saying last fall when they first learned about Congress’ proposed $750 billion bailout package. Boy did that cause a big hoopla over! Some Americans agreed with the notion and need for the $750 billion financial industry bailout package while others despised it. In the end, Congress passed the bailout. While the major companies that received a portion of the bailout money to stay afloat saw some immediate benefits of the bailout, it wasn’t until January that the average American—homebuyers, in particular—began to see the trickle-down benefits.
Trickle, Trickle.
While the $750 billion bailout package was designed to help various financial institutions, the help the companies received did come at a cost to the firms: the United States government essentially gained a significant stake in those businesses when they doled out a portion of the bailout to firms. The specifics of the bailout and the deals with each financial firm are complex. Therefore, we won’t go into all of that. Besides, it’s not all that interesting. What is interesting is that, once the deals were done, the U.S. government emerged as the entity to provide financial backing for a majority of the mortgages in the U.S. That means that, if you already have a mortgage, Uncle Sam might actually now back a portion of your financing; it also means that if you’re looking to buy, Uncle Sam will likely provide the funding for the mortgage loan that you need.
What’s In It For Me?
I know what you’re thinking: What’s in it for me? In a word: Lots. Mortgage rates have done just as financial experts predicted: They’ve plummeted! The national average in January was 5.26% with rates in some areas being less than 5%. Now, if you haven’t been keeping up with the mortgage industry, that dip is actually a good thing for American homeowners and homebuyers. How so? Well, that depends on which side of the real estate deal you’re on.
If you are a current homeowner, low mortgage rates mean that you can attempt to refinance your mortgage loan at a mortgage rate that’s significantly less than your current mortgage rate. As a result, your mortgage payment will be smaller, and therefore, it will be easier for you to keep your home in this tumultuous economy. Meanwhile, if you’re a homebuyer, the low mortgage rates mean that owning a home will be less costly; your mortgage payment, as long as you buy at or below your means, will be affordable. Though this is good news for you—whether you’re a homeowner or homebuyer—remember this: Being offered a bargain mortgage rate, or a mortgage loan at all, is not "automatic." You still have to do your part to make sure your credit score and overall finances are in check to qualify for a new mortgage or to refinance your current mortgage loan.
The Hope
The goal of the $750 billion bailout package was, of course, to stabalize the American financial industry. While it appears that the package has succeed in being an excellent band-aid for the United States’ financial industry’s woes, whether it will be enough to get the American economy back on track for the long-run still remains to be seen; that’s a lofty aspiration that may or may not be realized. The glimmer of hope that the bailout package will energize the housing industry is much brighter. The lower interest rates will make mortgages more affordable; that means that, in theory, more homeowners will be able to afford to keep their homes through refinancing their mortgages and that more homebuyers will be able to secure affordable mortgage rates.
The Reality
While mortgage rates have been positively affected so far, the future remains uncertain. Therefore, if you’re planning to buy or refinance, don’t drag your feet. It took just three months for the bailout trickle down to reach American homeowners and homebuyers, that trickle could dry up just as quickly.
