Time to refinance?

NEW YORK (CNNMoney.com) -- Interest rates on 30-year mortgages are down and mortgage applications are up. Is it time to refinance?

The big headline here is that interest rates on the 30-year fixed mortgage are at historic lows. According to the Mortgage Bankers Association, the rate is at 5.98%.

"Back in the 1980s, rates were at 15% or 16%," says Bob Moulton of Americana Mortgage. Remember, interest rates don't automatically go down when the Fed cuts the prime rate. Instead, interest rates respond to overall market sentiment.

Even after the rate-cutting binge the Fed has been on, the rates on a 30-year fixed mortgage went up. That's what makes this decline so newsworthy. So, if you have an adjustable rate mortgage, and you plan to stay in your home for at least 2 to 3 years, you may really benefit from refinancing.

Banks want to loan money to people with good credit. In fact, they're insisting on it according to Melissa Cohn of Manhattan Mortgage. For some lenders, that's a score of 680, while other lenders are only considering those with credit scores above 720. Banks are being more selective in terms of borrowers according to Moulton.

So, if you do have excellent credit, take advantage of the products out there. If you want to refinance, negotiate with your lender. You have leverage here, especially if you refinance with a lender who holds your original mortgage.

If you can, take out a home equity line of credit. You don't have to tap into it, but it's nice to have in an emergency.

A jumbo loan is a mortgage that's more than $417,000. As part of the economic stimulus bill signed by the president, the limit for these mortgages will be temporarily raised from to $729,750.

This has been a tough area because lenders are reluctant to back these loans. And if that becomes a reality, it means you may be able to get a lower interest rate on a jumbo loan.

Here's another bit of good news, if you bought a no-income jumbo loan and your credit score has improved and you're able to provide tax returns, you may be able to get a full-income jumbo loan, says Moulton. And that's cheaper and less risky than a no-income jumbo.

Home prices are the lowest they've been since 2004 according to a report by lender National City Corp. Price declines and improved affordability during the last three months of 2007.

So, if you've been on the sidelines, wondering whether to invest in this turbulent market, it's time to start doing your research. No one really knows when the market will hit bottom. It makes sense to thoroughly investigate the area you're interested in.