The real estae world has been sent completely on its ear this year, with bailouts, credit crunches, foreclosures and more. What can we expect to happen? Will rates continue to fall, or is this the best time to buy?

With credit conditions so por and so many foreclosures casting a pall over the mortgage industry, one would think that those candidates for mortgages with good credit histories would be able to name their rate when it comes to a mortgage. But instead, banks are tightening their purse strings for all borrowers and even the best risks are seeing higher rates.

It seems pretty short sighted, but to make up for plunging revenues, banks are increasing rates across the board, instead of offering attractive rates for their most credit worthy borrowers. Matters in the financial industry are far from normal, however, and credit card companies are also using this strategy of higher rates to increase revenue in this tight market.

In the good old days, a slowdown in the markets would usually mean a lowering of interest rates since lenders would try to attract more customers with attractive rates. But with the banking industry in turmoil, it seems like none of the old rules count.

What does all of this portend for someone who needs to decide if this is the right time to borrow for a home? Is it smarter right now to wait out this unusual phase, in the hopes rates will fall back down, or take advantage of whatever credit is there before the economy gets worse?

Some economists are not only forecasting a recession, but even a depression, with deflation instead of inflation. Deflationary tendencies normally mean lower to even negative real interest rates, and that would mean borrowers should wait a little longer.

Some banks are still actively seeking borrowers. Many small lenders never had the capital to delve into the giant home loan programs that many of the bigger banks did. Some were simply too small to venture into dangerous loans.

There is another strong reason for waiting to buy right now and that is because housing prices probably still have a way to come down. A study of home prices conducted by researcher Case-Schiller shows an average decrease of 17%, but some regions with home prices falling 25%. If a combination of lower interest rates and lower home prices are in store for the housing market, it may be wise to delay a home buying decision.

There are not a lot of varieties when it comes to mortgage insurance products. There is mortgage life insurance to guarantee that your home loan will be paid on the event of your death. You can pick decreasing or fixed term, depending on the kind of loan you have. There is mortgage disability insurance, which will guarantee that your home loan payment will be made in case you are disabled and cannot work.

But behind these basic policies, there are some choices buyers have to make in terms of their policies.

For example, a mortgage disability policy can be one with partial disability benefits whereby the beneficiary is paid a certain amount during the defined period of the disability or it may be with residual benefits where the beneficiary is paid benefits in proportion to his loss of income.

You may have a choice between short term disability insurance where the policy will cover a maximum term of, for example two years. This is usually a policy for someone who has another policy that would kick in at a later age.

There are also a number of riders that will be shown to a policy purchaser. Some of the riders normally offered are guaranteed future insurability, non cancelable policy, waiver of premium, inflation protection and guaranteed renewable policy.

Inflation Protection

With this rider, inflation is factored into the payout, so that your disability payments, for example, will go up as the cost of living goes up. A rider such as this prevents your disability payment from becoming inadequate should inflation heat up.

Guaranteed Future Insurability

The value of your home may increase because market forces or improvements you have made, but if you purchase this rider, you will be guaranteed that you can increase the insurance to cover it, without re-applying.

Guaranteed Renewable Policy

You will always possess the right to renew the policy, but the insurer reserves the right to increase premiums.

Non-Cancelable Policy

This rider renews the policy and also protects the premium from going up.

Waiver of Premium

When have started collecting benefits under the policy, you will not have to continue to pay the premiums, if you pick this rider. This prevents any additional expenses during the length of your disability.

As you start the process of applying for a mortgage, you will probably get into discussions about mortgage insurance.

First of all, there is PMI, Purchase Mortgage Insurance, which the lender requires some buyers to take out (and pay for) on their home loan in the event they are unable to continue to make the payments on the loan.

If you have a small deposit, the lender will be talking about insurance to protect himself. The problem most banks have is that the borrower does not have enough invested in the home if paying the mortgage becomes difficult. In a low or no money down mortgage, the buyer has risked no substantial amount that would make him protect his investment as much as he can.

So the bank insists upon an insurance policy that will protect him if the borrower is not able to continue his mortgage payments. Note that the lender is the beneficiary, not the homeowner or his family.

The kind of policy you need to take out to protect your family is a completely different type of policy that will cover the mortgage in the case of death or disability.

The main wage earner would take out a policy that would protect his family and permit them to keep the residence, in case anything happens to him.

If he passes on, mortgage life insurance would pay off the mortgage, and if he is disabled for any length of time, mortgage disability insurance will continue the mortgage payments in the interim. Decreasing term mortgage life insurance is the one most people subscribe to, since mortgages go down and therefore it is not needed to keep the initial mortgage amount as the policy principal. There is no need to continue paying the premium on a $200,000 mortgage as the balance gets lower and lower with each mortgage payment.

For those who are concerned about them and their family being able to stay in their house in case of a medical disability, mortgage disability insurance will pay the monthly bill for the disability period.

The difference in these policies makes it important that you have to understand what your bank is talking about. Some lenders may be anxious to sign you up for mortgage life or disability insurance because they can make a commission from it, but if you are in a situation with a low down payment loan, your bank may only be talking about protecting his interests, not yours, when he discusses mortgage insurance with you.

Understand what you purchase before you buy is always critical, but no more so when it is disability insurance. So as to compare the different policies that will be offered to you, you have to be aware of and understand each aspect and its impact on the policy premium.

One important component is what the definition of disability is per the policy. This is a critical component, especially if you have a highly specialized job. Be sure whether it covers whether it covers “own occupation” or any occupation”. Own occupation means it is what you are trained to do, and if you can no longer do it, your income will be severely curtailed. This feature means the policy will only cover you if you are nable to perform any occupation, no matter what it is. Imagine an airline pilot who has been demoted to a clerk.

This is a real possibility if you chose the Any occupation option. It is important to make sure you amply insured to substitute your old salary.

The next area of concern is the benefit period. The typical benefit period is to age 65, but if you are in a position to supplement your income in some way before the age of 65, you can greatly reduce your premiums. Retirement funds that become freed, or a spouse’s social security can mean that you may not need coverage until 65 after all.

The benefit amount is something that should be carefully looked at when you are signing up for a mortgage disability policy. You should calculate collecting at least the amount of the mortgage payment. But in addition, perhaps you should cover other home related expenses to make sure you can keep the home, such as the property taxes, insurance and maintenance costs. Of course, covering these will raise the premiums, but it is worthwhile to do the cost/benefit analysis.

Those are the basic components that will determine the coverage and premiums of your mortgage disability insurance. There are many other features, most of which are optional features to your policy, also known as riders.

If you are concerned about the cost of keeping your home increasing, you should consider the inflation rider. With this, the amount of the benefit increases along with the rate of inflation. Since prices are constantly going up, this is something that should be thought about. There are two kinds, simple, whereby a percentage is added to the benefits, or compound, which compounds previously granted increases.

Various riders you may be offered are non cancelable policy, guaranteed renewable policy, guaranteed future insurability or waiver of premium.

The concept of any kind of disability insurance is easy: it is to provide salary in case salary is cut off due to accident or illness. There are government programs that offer such insurance, and a number of companies offer group disability insurance to their employees. It works similar to an unemployment program but comes into play if you can’t work because you become ill or injured, not because there is no work.

Some policies are for illnesses related to the job, but many cover any illness or injury that prevents you from earning a salary. Disability insurance is frequently a benefit given by employers at a low rate since it is part of a group package, and employees always have the right to subscribe to more if they want to.

Disability insurance does not cover all of one’s salary, but most times more than half of it. If you have a home loan to pay, this may seem very inadequate, since a home loan payment can take up to half of one’s income in many cases. And since your home is probably your most valuable asset, youwill want to protect it.

This is where mortgage disability insurance steps in. When you do become disabled, when you subscribe to mortgage disability insurance, you will have the money to pay your mortgage each month, and your regular disability payments can be used for other living expenses.

If you have mortgage life insurance, it will take care of your family’s obligation to pay off the home loan in the case you die. But disabilities are much more likely to occur than death. If you were unable to work for an extended period of time, would you or your family be in a position to carry the mortgage? This is the contingency that a mortgage disability insurance policy would be for.

If there are two wage earners in the family, they can both be covered by mortgage disability insurance. If either you or your spouse were disabled, the insurance policy would make the monthly payments so your home could be protected. You will still get other disability payments to cover other living expenses.

You have to understand the terms under which you can access the policy; they differ greatly. Make sure understand and are comfortable with all of the terms, since not all illness will be covered, and there can be waiting periods. Once you understand and compare a number of policies, you will be in the best position to choose the best one for your needs.

When most people consider homeowners insurance, they usually think about insurance to protect against the loss from fire or storms. This is actually known as “casualty” insurance and does not cover the contingency that the homeowner will lose his home simply because he can no longer pay for it, due to other forces beyond his control, such as death or disability.

Home life or disability insurance is the type of policy that protects against this happening. It is more proballe that you will become disabled and not be able to pay for your mortgage than it is that your home will be consumed by fire.

Lenders will typically offer a mortgage life policy when you sign up for a mortgage. But you can also get your own mortgage insurance through your own personal insurance policy. There are a number of reasons you should consider your own insurance policy instead of the one offered by your lender.

Individual policies do offer a wider range of choices that the lender’s policy probably cannot. A bank policy is usually a standard policy and is issued for the amount of the mortgage. If you wanted any changes, this would not be offered to you.

You cannot make it for more than the amount of the loan, in case you wanted to allow for other problems your family may encounter. Adding a “comfort” zone for your family is not an choice, since you cannot change the policy by increasing the amount, or even making small changes.

This is the best rationale for looking around for the policy that will best meet your needs. In addition to deciding the amount of the policy you want, you can choose to have the policy remain the same or decrease over time. Most lender policies are decreasing term. In the case of the lender’s policy, the policy is usually paid off if the mortgage is paid off or the house is sold. If you pick the policy, you can often use it for another residence you move to.

There is no convertibility factor in a group mortgage insurance policy, while an individual policy can be converted, and cash values will not accrue with group policies whereas an individual policy can provide a return of premiums over time.

A final caveat is that lenders are not in the business of insurance, they are in the business of making loans. The expert in the area of insurance is an insurance company, not a bank, so for the best choice and quality of product, you should work with an insurance broker.

When you apply for a mortgage, you will probably also be given the option of taking mortgage life insurance. Do not be tricked into thinking that you have to get your mortgage insurance with the company that is handling your mortgage. (An exception is purchase mortgage insurance, the kind the lender insists you to take out to protect them when you have a low down payment.)

Once you begin to receive offers, from lenders or insurance companies on mortgage life insurance, have a look at each of them for the best offer.

Like almost any other product available today, you can also look for your mortgage insurance online. This is the best way to be sure you are getting the best bang for your buck when it comes to mortgage insurance. There may even be “online specials that are not offered in person or sent in the mail. Offers you may not receive by mail or on the phone may be there on the internet.

They may even give you a worksheet you can employ to make your own comparisons. Just print a few copies and half the work is done for you: you only have to fill in the amounts and terms of the policies you are comparing.

The amount of coverage is just as important as the premium you will have to. Be sure you ask about combination coverage. Many times, these kinds of policies turn out to cheaper per feature.

Even though this may seem like hard work, when you think about what is at stake and how easy it is to get mixed, you will see that this is the only way. This is a long term choice, one you will be paying for over many years.

So dont be complacent and just take the offer that your mortgage provider offers you. It is important to review one or two others to make sure they are in the same range. If you change your mind or find a better policy later, that will be lost funds, or you may be dangerously underinsured when the time comes that you need it. Another important benefit to shopping around is that you will find a lot of options to choose from: perhaps there is one you dont need and can save money by avoiding.