Average 30-year mortgage rates dropped for the seventh week in a row to 4.85% according to BestCashCow/Informa data. That's down from the high of 5.20% in early April. Homebuyers and homeowners looking to refinance can thank the European debt crisis for the most recent drop below 5%. European debt fears have sent a wave of cash into Treasuries, driving down the 10 year note. The 10 year note is the benchmark used to set 30 year rates.

Other mortgage rates have also come down. The 15-year fixed rate mortgage dropped to 4.30%, down from a 4.52% in early April. Five-year ARMs are at 3.76% versus 4.05% in early April.

What Does This Mean for Homebuyers?

I've been following actual rates, not just averages for a 30-year fixed rate loan in Massachusetts with 0 points ($200,000 loan) for the past four months. Three weeks ago, the rate shot up to 5.125%. Three weeks ago it was 4.875%. Last week the rate was 4.750%. This week it's 4.625%. Best rates continue to drop along with the averages.

View mortgage rates by state and zip code.

With mortgage rates still hovering around record lows, many new homeowners and those who refinance are opting for the 15-year mortgage. A 15-year mortgage has a number of advantages over longer mortgages, but it also has at least one disadvantage. If you are looking for a home or thinking about refinancing, here are some things you should know about a 15-year mortgage so you can make a more informed decision.

Lower Mortgage Rates
When you decide to take out a 15-year fixed rate mortgage, you can expect to pay lower interest rates on your loan than you would with most other types of mortgages. As a result of lower mortgage rates, you pay less over the term of the loan than you would with a 30 year mortgage. You could save thousands or, in some cases, even tens of thousands of dollars by choosing a 15 year mortgage.

Shorter Repayment Period
The most obvious advantage of a 15 year fixed rate mortgage is that you will be done paying on it in half the time than you would be with a 30 year mortgage. If you are trying to get out of debt or if you hate to incur debt, the 15 year mortgage is ideal for you because of this advantage.

Larger Monthly Payments
One of the few drawbacks to taking out a 15 year fixed rate mortgage is that the monthly payments are often somewhat higher than with a 30 year mortgage. Most of the time, the larger monthly payments are not much higher than a 30 year mortgage, but they can be depending on the particular interest rate and terms of your mortgage loan. This is because the payments have to be higher in order to pay off the mortgage in half the time. However, as stated above, you will pay off the mortgage in half the time and pay less on the interest which will save you a bundle of money in the long run.

Before making the decision to go with a 15 year mortgage, realistically evaluate your income and your ability to pay the extra money each month. Take into consideration the cost of maintaining the home, providing insurance for it and paying the property taxes. You might be able roll all of these costs into one payment. Your monthly mortgage payment should be no more than about one-third of your net income so you can be sure to have money left over for groceries and other bills. If it’s possible with your income, a 15 year fixed rate mortgage is probably the best way to go.

It seems that in these trying economic times, more and more homeowners are simply walking away from their home loan mortgages and looking for a new start. For hundreds of thousands of homeowners (if not millions), their homes are worth less than what they owe and they are unable to make the payments any longer. As a result, they see that walking away and letting the house go back to the bank is their only reasonable option.

But a recent report shows that most homeowners are not willing to do this. Even if they find that they owe more on their homes than its actual worth, they would continue to live in it and do their best to make the monthly payments so they can stay in their home. About 59 percent of the homeowners who found themselves underwater said they would stay in their homes regardless of how much their home’s value dropped compared to the amount they owe. Only 41 percent of those in the survey said that they would think about walking away from their home and letting it go through foreclosure.

Of that 41 percent, only about small fraction – about one percent – said that leaving their home to go back to the bank would be their first choice if they were no longer able to make their monthly mortgage payments.

If you are in this proverbial pickle and your home is worth much less than what you owe on it, what are your plans? For those who plan to stay regardless of the financial difficulties, the federal government is offering a program to help. The Home Affordable Modification Program, or HAMP, is an initiative that strives to lower the monthly payments on mortgages through a loan modification. With this program, the government essentially works with the banks and lenders to help reduce the monthly mortgage payments of troubled homeowners.

The HAMP initiative has three options for homeowners who are in trouble. They can either refinance their mortgage through the Home Affordable Refinance Program (HARP), modify their existing or second mortgage through government programs or consider other alternatives to foreclosure with the Home Affordable Foreclosure Alternatives Program, or HAFA. In order to qualify for this program, you loan must be owned or guaranteed by Freddie Mac or Fannie Mae. You must also be current on your payments and be able to make the payments on your modified loan.

You can learn more about these government programs designed to help troubled homeowners here.

What are you doing to make ends meet so you can pay the mortgage every month? Are you making extreme sacrifices? Have you done everything in your power to make your payments and still unable to make it happen? Let us know how you are handling this situation. Others may get an idea to help them get through these trying times from you.

If you are a distressed homeowner living in Maryland, you will be getting some extra protection when it comes to foreclosures and staying in your home. On July 1, a new law will go into effect in the state that allows you to hold on to your home if you find yourself in financial trouble.

This new law will especially be effective in Maryland’s Prince George’s County as that area has an unusually high rate of foreclosure and delinquent mortgage payments. In fact, there were more than 1,370 foreclosures in that county during the month of April. That accounted for nearly one quarter of all foreclosures in the entire Washington region.

But that doesn’t mean that troubled homeowners have not searched for help. Thousands of people in the area have lost their jobs or had a reduction in salary in recent months. For awhile, troubled homeowners were trying to get modifications for their loans in hopes of making lower payments and staying current on their mortgages. However, in recent months, more and more homeowners are realizing that modifications are not the best financial decision for their situation. As a result, they have decided that it is in their best interest to simply allow the homes to go back to the lender and walk away from paying the mortgage. Many of the homeowners figure they will never have enough equity in their home to make it worth staying. Others simply do not have enough invested in their home to make it worth staying and struggling through the hardship.

The new law, however, will force lenders and banks to go through mediation with troubled homeowners before they can foreclose on their home. The lenders will need to try and work out some modification on the mortgage loan instead of foreclosing on the home. The program is receiving financial support to help make it successful from TARP, or the Troubled Assets Relief Program. Under the new regulations in Maryland, lenders must send homeowners an application loan to modify their home loan at least 45 days before they start any foreclosure proceedings.

Housing advocates supported this new law because the Obama administration’s loan modification program was not helping many people in the state. It was taking too long for banks to process any paperwork relating to loan modifications and few people could qualify for the modifications offered by the federal government.

Even if this does not prevent foreclosures from happening in Maryland, it will make homeowners think twice before they just pick up and walk away from their financial obligation. It could save some lives of families being put into upheaval over a foreclosure as well. Do you think this is a good idea or is the state doing too much to regulate the banks and lenders in their efforts to help this major problem?

Although it seems as though the housing market may be on an upswing, there are still millions of distressed homeowners who are drowning in the sea that is their mortgage payments. While there is a lot of help out there for some qualifying homeowners, some do not qualify for any aid regardless of their need or situation. That is why some homeowners have had to get creative with their solutions. Here are some of those solutions that are gaining in popularity.

Short Sales
You have probably heard this term making the rounds in the real estate industry but you may not know what it means. When a homeowner has to resort to a short sale, it means that they owner finds a buyer for the home and then those two parties along with the bank that holds the mortgage negotiate a deal that works for everybody. Because there have been so many short sales going on in recent years, it may take a long time to get the lender to respond to a request. During that time, you may incur more debt if you are unable to make the mortgage payments while you wait for the lender.

Foreclosure
Foreclosures are running rampant these days with the rising number of distressed homeowners. A foreclosure occurs when a lender takes ownership of the property due to nonpayment and forces the homeowner to move out of the home. Because of the high number of foreclosures, many lenders are actually paying people to move out of their homes as log as they leave the property clean and livable once they leave. There have been too many disgruntled homeowners leaving their house in disarray or totally demolished before leaving it for good so lenders want to offer an incentive to keep people from doing that.

Strategic Defaults
With a strategic default, the homeowner voluntarily walks away from their home and mortgage because they simply feel they will no longer be able to make the payments. Homeowners may choose a strategic default for several reasons. They might want to try to get another mortgage loan before the defaulted loan goes on their credit report. They might also want to cut their losses. Either way, the homeowner decides the payments are too high and the best financial thing to do is to leave it all behind. This strategy has seen a jump during the first quarter of this year. In fact, there are more homeowners that have chosen this option than the number of permanently modified mortgages to date.

Are you having problems paying your mortgage? What are some of the options you have considered?

Average 30-year mortgage rates dropped below 5% for th first time since March. Fears of rates spiking once the Fed ended its mortgage programs seem to be largely unfounded. Much thanks for the drop in rates has to go to Europe. Fears over a disintegration of the Euro have driven investors to Treasuries, driving down yields. Since 30 year mortgage rates are indexed to 10 year Treasury Notes, rates have come down. Rates are now significantly below the year's high of 5.20% set in early April.

What Does This Mean for Homebuyers?

I've been following actual rates, not just averages for a 30-year fixed rate loan in Massachusetts with 0 points ($200,000 loan) for the past four months. Four weeks ago, the rate shot up to 5.125%. It now stands at 4.750%, the same as the previous week.

Other Mortgage Rates

Other mortgage rates also dropped. The average 15-year fixed rate mortgage dropped from 4.35% to 4.32% and is now below its 2010 low of 4.34% in March. The 5 year ARM dropped from 3.86% to 3.73% this week. The 1-year ARM, one of the most volatile didn't live up to its billing this week moving from 4.14% to 4.10%.

View mortgage rates by state and zip code.

When you are buying a house, there are many things to consider. Unfortunately, the excitement of buying a new home can cause many people to forget about certain considerations and they often rush into the purchase without being smart about the decision. Before you sign the dotted line, take a step back, breathe and ask yourself the following questions to make sure you are making the right decision.

How Long Do I Plan on Staying?
If you are considering buying a new home, you should plan on staying in it for at least a few years. If you are in a transition phase in your life and you may be moving soon, buying a home right now may not be fore you. The costs of closing and other fees associated with buying a home are enough such that you will lose money on the purchase if your do not stay for a few years and build up equity. However, if you plan on staying in the home for five years or more, it may be a wise decision to buy instead of rent.

Can I Afford This Home?
Being able to afford a new home is more than just being able to make the payments. Your lender may tell you that you can afford the home, but it is up to you to make the final decision. You have to consider the insurance, property taxes, maintenance and utilities that will also need to be paid regularly. Lenders do not generally consider these other costs and they often just look at your income to compare it against the monthly mortgage payments. That is one of the reasons the housing industry fell into the financial crisis that has occurred in recent years.

Is My Credit Good Enough Right Now?
If you have blemishes on your credit report, you may want to consider waiting six months to a year before buying a new home. Take this extra time to clean up your credit and bring up your score as much as possible. You may have a score that qualifies for a mortgage loan, but raising your score will help you qualify for a reduced interest rate which could save you thousands of dollars over the term of the mortgage.

Does the Area Have Good Schools?
Living in an area that offers good schools is great for two reasons: Your children will get a good education and it is a great selling point if you decide to move away. That second reason is why you should try to find a home near good schools even if you don’t have kids. For most families, living in a good school district is the top deciding factor when choosing a new home.