Mortgage rates hit an all-time low last week, dropping to:

• 2.97 percent for a 15-year fixed mortgage, down from 3.74 percent in 2011

• 3.75 percent for a 30-year fixed mortgage, down from 4.55 percent in 2011

Source: CNNMoney

Mortgage rates hit record lows last week, the fifth record-setting week in a row.

Signal Mountain resident David Farmer took advantage of those falling rates, dropping two percentage points and 11 years off his mortgage when he refinanced last month.

Farmer lowered his monthly payment and expects to save hundreds of thousands of dollars over the next 15 years of his mortgages.

"It made a drastic, dramatic difference," he said. "The key through it all was keeping a really good credit score."

Farmer started with a 30-year, 5.25 percent mortgage rate when he bought his Signal Mountain home in 2008. He bought a home to rent out a year earlier at an even higher 30-year, 7.75 percent mortgage rate.

Last week, he slashed those rates to 15-year, 3.25 and 3.75 percent mortgages, respectively.

"I feel like a success story coming through this," he said. "I'm now at an all-time-low rate on both."

Farmer said he was able to refinance because he guarded his credit, always making house payments on time. Now he feels money has finally freed up for him to be able to refinance.

Though mortgage rates are at an all-time low, fewer people can take advantage of them than before the recession. Without a credit score of 640 or higher, finding a loan can be difficult.

"The money has become available, but they've upped the qualifications," Farmer said. "The bankers have woken up. They're probably looking at each other and saying, 'Duh, what were we thinking?'"

Home affordability is at a 40-year high thanks to the decline in interest rates coupled with a decline in home values. Local home inventory has been dropping, meaning houses are selling faster than their replacements can be brought to market.

"Lower rates obviously do nothing but help," said Bruce Dodd, director of operations at People's Home Equity. "Our market has been not as affected as if you look at a lot of the different markets. We've held our own from a value standpoint."

Home values declined in Chattanooga from October 2008 through November 2010, then started to grow at a crawl. For the past four months, growth has picked up. The median home price in Chattanooga grew 4 percent between January and April of this year compared with the same time a year ago.

"What you've seen is the beginning of a consistent trend," said Mark Hite, president of the Greater Chattanooga Association of REALTORs. "It allows a first home buyer to get into the housing market."

Now potential homeowners just need to get in the right mindset to buy, Dodd said. Credit problems and fears over home values have held buyers back, he said, but a variety of organizations as local as the Chattanooga Neighborhood Enterprise and as sweeping as the United States Department of Agriculture offer incentives to many of those buyers.

"A lot of the challenge is just breaking the mindset that things are terrible," Dodd said.