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Getting the best mortgage rates

Rates on home loans are still attractive. Currently, the average rate for a 30-year fixed-rate mortgage is 3.6 percent, according to Freddie Mac, a mortgage buyer, compared with an average rate of 5.4 percent for the last ten years. But to qualify you'll need a sizable down payment (generally 10 percent to 20 percent of the home's value), a solid FICO credit score (720 or higher) and plenty of documentation to prove your income, among other things. If you don't clear those hurdles, you may be a good candidate for an FHA loan, which is a mortgage backed by the Federal Housing Administration. These loans charge just 3.45 percent in interest today and require a down payment of only 3.5 percent. Also, you don't need sterling credit. You may be approved with a FICO score as low as 580, though many lenders want a minimum of 620 today, says Keith Gumbinger of HSH.com, which keeps tabs on the housing industry. New mortgage fees So what's the catch? You may owe more in fees. FHA borrowers who put down less than 20 percent have to pay mortgage insurance. Starting April 1, the premium for new loans of up to $625,500, rises by 10 percentage points (for bigger loans, the fee goes up by 0.05 percentage points). And beginning June 3, most new borrowers will have to pay the premiums for the life of the loan. Previously, mortgage insurance was dropped once the loan balance fell to 78 percent of the home's original value. Conventional loans also require mortgage insurance for small down payments, but lenders may be willing to waive the charge once you've paid down a chunk of the loan. more