How a rate cut could affect you

NEW YORK (CNNMoney.com) -- All eyes are on the Federal Reserve and whether or not it will cut rates next week. If you're looking for a loan, wondering whether to refinance or just anxious about real estate, here's how to play the Fed's decision in your favor.

Investors are expecting the central bank to lower rates by at least a quarter of a percentage point, but some are hoping for as much as a half-percent cut. Fed Chief Ben Bernanke hasn't tipped his hand, but he has indicated the central bank is prepared to make rate cuts to protect the economy from the impact of a global credit crunch.

Even if the Fed does act, some experts are saying there may be little change in mortgage rates. Here's why: Typically mortgage rates follow the rates of interest that the government pays for 10-year Treasuries.

But in the last few weeks, 10-year Treasuries yields have fallen substantially, while mortgage rates have remained stuck around 6.2 percent. Those rates aren't budging because bankers are so uncertain about the mortgage market that they are requiring borrowers to pay a premium.

"It's going to take a series of moves [by the Fed] to allow credit to flow again. The mortgage market isn't going to behave normally until next spring or summer," according to Mark Zandi of Economy.com.

But the markets could also have to deal with a more pessimistic economic outlook that comes out that morning from the National Association of Realtors. The trade group will update its monthly economic outlook. The NAR has been cutting its forecasts for both the volume of home sales and prices regularly in its reports since the spring.

It's not just about what the Fed does, it's more about how the market reacts - specifically the bond market. There's a chance the Fed could cut rates, and mortgage rates won't go anywhere because there's still a lot of fear on Wall Street.

You can always lock in a rate with one lender and have your mortgage broker float you with another bank. There aren't any fees associated with this if you use a broker. This way, if rates don't come down dramatically, you can always stick with the first deal, says Melissa Cohen, a mortgage broker with Manhattan Mortgage.

And keep in mind too that if you're looking for a traditional 30-year mortgage, you'll have an easier time finding banks to back your loan.

If you're in a longer adjustable rate mortgage, like a 7-year or a 10-year ARM, decide how long you want to stay in the house and figure out how much time you have before your rate adjusts.

If you have less than one year left, it's time to refinance. The process of refinancing takes at least 60 days. If you have two years left and good mortgage terms, it'll be worth your while to wait, says Bob Moulton of Americana Mortgage.

Consult your gut, too, though. Some folks will simply be too anxious to wait it out and watch rates.

If you are facing a rate adjustment and housing prices have fallen a bit, you may want to refinance sooner rather than later. That's because it's likely prices will fall even further.

Earlier this week, a survey came out indicating that home prices are up a measly 2.6 percent - and that's the weakest gain in over a decade. Places where there were the biggest price declines include California, Florida and New England.

Plus, credit standards are only going to get tougher. It's not just the Fed game you're going to have to play, it's the credit game.