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Mortgage rates drop, tax credit extended, high loan limits extended
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Mortgage rates on 30 year fixed rate mortgages dropped below 5% today for the first time in 4 weeks as 
the Feds voted to keep the overnight lending rate untouched at 0% - 0.25%. The economy appears to be showing some signs of stabilizing, but Fed Chief Ben Bernanke reiterated that we're not quite there yet, and it's too soon to start increasing overnight lending rates yet. However, he said he will act when it looks like inflation might start to become an issue. Everyone expects that to happen at some point next year.
Other monetary notables, like the Fed chief monitoring the Euro also held rates where they are for now, though there is nowhere else where the overnight lending rate is as low as in the U.S.
The Feds have also been subsidizing mortgage rates since December of last year in their purchase program of mortgage backed securities. That program had been scheduled to end this year, but was extended for the first quarter of next year. However. Bernanke said that there is no news at this time that would cause another extension past the first quarter of next year. It is widely believed that when the subsidies end, and the overnight lending rate is increased, we will see mortgage rates move up.
In other news, Congress passed two measures that are another boon to the housing market.
The first time home buyer tax credit deadline was extended to loans purchased on or before May 1, 2010, and closing by July 1, 2010. For first time home buyers the credit will remain at $8000, and all other home buyers could be eligible for up to $6500. The income limits to qualify for the credits was increased as well, to allow more buyers to qualify, and hopefully boost the move up and move down buyers. This will also hopefully move some inventory in the higher priced homes that have been very hard to sell all this year.
For current home owners looking to cash in on this credit, they must have owned their current home at least 5 years. The tax credit is available for the purchase of principal homes costing $800,000 or less. Purchase of second homes or vacation homes are ineligible. The credit will be phased out for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000.
Congress also voted to extend the higher conforming loan limits for Fannie, Freddie and FHA loans. These limits are set at 125% of the average home price in your area, up to a high limit o$795,000. You have to check your county limits to determine the actual high price limit for your area. This will have the greatest impact on states like California, Washington, and the Northeast where average home prices are substantially higher than most of the country. But, this is a huge boon for home buyers in those areas who would otherwise have to finance home purchases with "jumbo" loans which typically have much higher rates.
For more details about the home buyer tax credit for existing home owners, please read
Details for existing home owners
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