The real estate blog.

One can hardly go a day without hearing about additional fallout from the subprime mortgage market that is now affecting prime loans for residences as well as, commercial and business credit.

The recent reaction by the Central bank of the European Union and the Federal Reserve of the United States even scare economic bulls like me.

In the case of Europe, an additional $130 billion was made available to the banking system and quickly gobbled up by banks to hold. After the FOMC meeting on Wednesday, the Fed pumped $24 billion in currency that was just as quickly consumed by nervous banks.

Meanwhile, fear of money drying up is causing Wall Street to move into speculative overdrive. The Dow has lost almost 800 points in the last three weeks.

What is

a prospective homebuyer to do in a volatile market like we’re in now? First of all, those borrowers with good credit and a down payment can look forward to very attractive rates. All this bad news for stocks is good news for interest rates. They have dropped significantly in these past three weeks.

It’s everyone else considering a home purchase that needs to take a close look at their financial situation and make some firmly disciplined choices.

First, save as much money as you can. Cut out unnecessary purchases and delay major purchases if you can. Like the banks hoarding money right now, cash is king.

Secondly, pay off debt. Having a high debt to income ratio, or running out of money before the end of the month can both be solved with this action. You’ll also see your credit score improve as your ratios improve. If you have no debt, or little debt, consider opening credit lines (not spending them) or asking for increases for existing lines. In case the economic bears are right and an across the board credit crunch appears, it’s a good idea to have lines of credit, or cash reserves, waiting for a rainy day.

Third, focus on improving your credit score. Make sure your bills get paid on time. Emphasize paying down credit card debt. Don’t make unnecessary purchases for big ticket items like TVs, appliances or computers.

For those homebuyers looking for a house, now is actually a good time to buy. In hyperinflated markets, prices have come down and desperate sellers facing ARM resets or who purchased too many homes are willing to deal. The frenzy of multiple offer purchases and homes selling in a few hours are gone. Take your time, do your research, get your finances in order and make the best purchase you can.