Post-Katrina Mortgage Calculations

It's very difficult to talk about buying a home these days when so many people in the Gulf Coast are without them.

But such is the dichotomy of life.

And while no one wants to capitalize on the pain of others, there may be a few buying opportunities over the next few months, especially in the mortgage world.

That's because there's speculation that Alan Greenspan and his cronies may pause from raising short-term interest rates when they meet on Sept. 20. Any halt (temporary or not) would buck the trend since the Federal Reserve has raised rates by a quarter of a percentage point 10 consecutive times in the last 14 months. But with the Katrina disaster and the high price of oil and gas, the Fed may actually hold back for a bit and allow the economy to recuperate.

To their credit, the central bankers have shown restraint after past major disasters. The Fed cut interest rates in between scheduled meetings after the Sept. 11, 2001 terrorist attacks, as well as when Hurricane Andrew smacked Florida back in 1992. So it's not unlikely that they'll at least hold rates steady at this point.

Of course, pausing on a rate hike now could just mean more aggressive increases later. So if you're in the market for a new mortgage or are considering refinancing an existing one, it actually may be prudent to take advantage of the current situation.

No Sale Here

Remember, just because something appears to be on sale doesn't mean you should buy it. So don't let the media's coverage of what Greenspan will or will not do pressure you into locking into a mortgage you'll ultimately regret having.

It's just like the fabulous Manolo Blahnik shoes I bought the other day. Regularly $650, I got them for a mere $200. I walked out of there thinking that I got a steal -- until I got home and realized my kids' tuition was due and I couldn't afford those $200 shoes, regardless of the deal I thought I got.