Fed Lowers Mortgage Rates, but Bankruptcy May Be Better Solution for Homebuyers
The Federal Reserve is embarking on an ambitious plan to boost the economy by lowering mortgage rates. But experts say the program, which was announced last week, may not be enough.
The Fed plans to begin buying $40 billion a month in mortgage-backed securities in an attempt to push mortgage rates lower.
But with rates already at all-time lows of around 3.5 percent, it's unlikely the Fed's effort will make much of a difference.
As our DebtStoppers bankruptcy lawyers point out, the program doesn't address the bigger issue. The problem isn't that mortgages are too expensive; it's that borrowers are having trouble qualifying for home loans in the first place.
Not that lower mortgage rates aren't beneficial. For existing homeowners, refinancing a high-interest loan can free up a significant amount of cash, potentially providing an economic boost.
According to CNN, about twice as many people are refinancing mortgages than are taking out new mortgages to buy homes.
Unfortunately, refinancing isn't an option for everyone.
Applying for a refinance can be a lengthy and tedious endeavor. In many cases, homeowners may not qualify - and even if they do, there's no guarantee that the money saved on interest will be worth the time and expense of the refinance process.
A more realistic solution for many folks may be bankruptcy.
Unlike a refinance, bankruptcy is a near-guaranteed way to save money. By reducing or eliminating unsecured debts and accompanying interest, homeowners - or those hoping to buy a home - can free up cash to pay the bills.
As consumers work toward completing their bankruptcy plan, they may also work toward improving their credit rating.
While it's true that filing for bankruptcy will appear on a person's credit report, many people who file are eventually able to secure better rates for loans and credit cards. Why? Because for those with large debt loads, bankruptcy may be the most effective way to gain control of financial problems while also protecting assets from creditors.
The jury is still out on whether the Fed's move is too little, too late to help the overall economy. But for individual consumers, it's never too late to take advantage of one of the government's most effective forms of consumer protection: bankruptcy.
To find out if bankruptcy could be your best solution, call the DebtStoppers Bankruptcy Law Firm at 800-440-7235. Call now for your free one-on-one debt analysis with a professional bankruptcy attorney in Chicago, Tennessee or Atlanta.
More Blog Entries:
Younger Borrowers Make Up Majority of Underwater Homeowners: August 28, 2012
Without Personal Finance Know-How, Today's Young Adults Are Getting into Trouble with Credit Card Debt: September 12, 2012
Additional Resources:
Hey Fed, Lower Mortgage Rates Will Only Do So Much, by Les Christie, CNN Money