New efforts from the Feds to help aid the ailing housing market have helped lower the rate on all mortgage rates to their lowest points in a year. Just a few weeks ago, first-time homebuyers with excellent credit were paying over a 6% interest rate for a 30-year fixed rate loan. According to Freddie Mac, the rate is a low 5.53% and still sliding. Consumers can save tens of thousands of dollars by refinancing, getting more home for their money and should entice first-time buyers.

The trend started last week when the Feds announced their plans to purchase billions of securities from Fannie, Freddie and Ginnie Mae. The slide continued today after several sources reported that the Treasury Department is investigating a plan to drive down mortgage rates as low as 4.5%.

Right now the majority of consumers taking advantage of this change are credit-worthy consumers searching for refinancing deals. Just last week, overall mortgage applications doubled. However, the refinancing traffic tripled and accounted for close to 70% of the mortgage applications, according to the Mortgage Bankers Association’s weekly survey.

However, the long-term goal is to get banks back to the business of lending and consumers back to spending. With the huge quantities of available properties, more affordable housing prices and a new standard Good Faith Estimate (GFE) practice sheet initiated by the US Department of Housing and Urban Development, the tides have certainly turned for those interested in taking the big leap.

The positive effects directly related to the government efforts will still take a period of time to manifest. Both home buying and refinancing periods are time consuming and will experience a bit of a slow down due to the upcoming banking holidays.

Interest free tax credit is available to first time home buyers. What a great opportunity to help take advantage of falling home prices.

The Housing and Economic Recovery Act of 2008 contained a provision for a tax credit of up to $7500 for first time home buyers. What makes this more interesting is a first time home buyer is defined as “a buyer who has not owned a principal residence during the three-year period prior to the purchase”. The credit is available for homes purchased on or after April 9, 2008 and before July 1, 2009, with the definition of purchase being the closing date.

There are income requirements, with single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualifying for the full tax credit. You may qualify for a partial tax credit if you are over these adjusted gross income limits.

Getting started with the tax credit program is simple; you claim the tax credit on your federal income tax return. The tax credit works like an interest-free loan and must be repaid over a 15-year period or when you sell the home, if there was a sufficient profit. The repayments do not begin until two years after the credit was claimed.

Remember, its interest free!