Interest rates on everything from home mortgages to credit cards have been falling in recent weeks. And despite the Federal Reserve's decision Tuesday to leave short-term rates unchanged, they could decline even more.
Does that mean it's a good time to get a loan? Not necessarily. Unless you have gold-plated credit, you might not qualify for the lowest rates. In fact, if you have tarnished credit, you might not be able to get a loan at all.
Here's why: The credit crunch makes it harder for lenders to raise capital. So they have less money to lend -- and not to poor risks. Here's a look at what you'll need to do to make the grade:
Home mortgages. Long-term mortgage rates have been sliding since the government announced that it would take over Freddie Mac and Fannie Mae. In recent months, the mortgage giants cut back on the number of mortgages they bought, driving up rates for borrowers. But now that the two companies no longer need to make a profit for shareholders, they can buy more loans. And that will inject more money into the mortgage markets, said Keith Gumbinger, vice president at HSH Associates, a mortgage information firm.
But to get the lowest mortgage rates you'll need a 20 percent down payment, well-documented income and assets, and a FICO score -- a common measure of creditworthiness -- of 720 or higher.
Home equity lines of credit. The average rate for a home equity line is around 5.6 percent, according to Bankrate.com. And because interest on most home equity lines is tax-deductible, the after-tax rate for many borrowers is only about 4 percent, said Greg McBride, senior analyst for Bankrate.com. But to get a home equity line, you'll probably need at least 20 percent equity in your home.
Credit cards. The average rate for a variable-rate credit card is around 11.3 percent, down from 14 percent a year ago, according to Bankrate.com. Again, though, only borrowers with excellent credit will enjoy these rates. Card issuers also have tightened their standards, said Curtis Arnold, founder of CardRatings.com.
Source:-
http://www.courier_journal.com/
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