Sales of new homes in the U.S. jumped 4.8 percent from August but fell more than 23 percent from September 2006, the federal government reported today in its release of new residential sales data for last month.

Both 15-year and 30-year fixed mortgage rates fell from last week and last year. The average rate for a 15-year mortgage is currently 5.99 percent. The average rate for a 30-year mortgage is currently 6.33 percent.

Existing homes sold at the slowest pace since 1998, according to Freddie Mac, the quasi-government agency that buys mortgages from banks.

Could this be a buyer’s market? Probably only if you’re on the higher end of the wealth scale.

Even 5-year Treasury-indexed adjustable rate mortgage (ARM) interest rates fell to 6.03 percent from 6.11 percent last week.

It’s really important to understand the terms of your mortgage before you sign on the dotted line. Some take these things for granted, but if you do, it can come back to bite you.

If you’re getting an ARM, you should know how long before it adjusts and what index the interest rate is tied to. It could be the Treasury notes, like I cited above, or it could be LIBOR – the London Interbank Offered Rate. Once the initial period of your ARM ends, you’ll face interest rate adjustments each time the index changes.

Whether to get an ARM or a fixed rate mortgage depends on how long you’ll be in the home and whether you’re comfortable taking on the risk of having a mortgage interest rate that fluctuates. It might seem like the better deal initially because it has the lower interest rate, but in the long run it could lead to higher payments. Think about all the folks who bought homes using ARMs within the past year and who are now clamoring to have their terms renegotiated or facing foreclosure.

Learn from their mistakes. Do what’s right for you, what you can afford comfortably. And bear in mind that some economists are predicting a recession.

Oct. 25, 2007.