Mortgage rates fell sharply this week with rates on 30-year mortgages dropping to the lowest level in more than two years.

Freddie Mac, the mortgage company, reported Thursday that 30-year, fixed-rate mortgages averaged 6.10 percent. That was down from 6.20 percent last week and was the lowest rate since the week of Oct. 13. 2005, when rates stood at 6.03 percent.

What does this mean if your are buying a home. Do it now! Even if housing prices drop it all comes down to payment (unless you are paying cash). Here is an example of why payment is just as important as equity.

Two scenarios

# 1 Purchase price of $250,000 (assuming 0 money down) with an interest rate of 6%. Payment will be $1,500 (principle and interest).

# 2 Purchase price of $240,000 (assuming 0 money down) with an interest rate of 7%. Payment will be $1,597 (priciple and interest).

A monthly difference of almost $100.

The botton line is if you plan on buying a house to live in it & enjoy it for a few years. You have no idea what the market will be like in a few year but we can say that interest rates are a known in the market. If rates go up, you will have higher payments. Buying now may be a better investment in the long run even if prices go down slightly.