The idea is under consideration as part of the Treasury Department’s continued effort to limit foreclosures, which has been at the core of the financial crisis. The plan would seek to revitalize the financial market without bailing out homeowners and lenders, the Journal reported Wednesday.

The reports circulating suggest that the Federal government is going to subsidize morgage companies so the average morgage rate is only 4.5%.  Currently that is nearly 1 full percenage point lower.  4.5% would also be near the lowest ever available to Americans! 

You should prepare now if you are in a position to purchase a new home.  Once enacted the real estate activity is going to spike and it will be uncertain how long these subsidized loans will be available.  One step is to check out a mortgage calculator to see how much house you could afford if the rates fall to 4.5%.

Many people ask themselves the all-important question of, “How much morgage can I afford?” This is an important part of the home purchasing experience as most sellers require what is known as a pre-approval before you can even think about making any form of offer. So before you even go house hunting, make sure that you know exactly how much morgage you can afford to take on ever month.

For starters you will need to determine your income to debt ratio. Basically most lenders go based on the fact that you can only afford 33% of your income going towards debt. So if you have other outstanding debts such as a car or even a credit card, these will be taken into account towards your actual monthly debt payments and can greatly reduce the amount of mortgage which you can be approved for.

You also need to take the time to figure out your own calulations before even going in to speak to a lender. This is important because when speaking to a lender in order to determine how much morgage you can afford, you need to be prepared to answer the financial questions that you will be asked. From there you figure out how much your monthly income is and how much your monthly debt payments are and then you can use a morgage calulator to give you an idea of what to expect when seeking out a mortgage.

Above all, take your time and make sure that you research everything prior to speaking with a lender so that you can make well-informed decisions regarding the acceptance of a morgage offer.