Mortgage rates mixed for week of September 20, 2010

Last week's average combined mortgage rates were a mixed bag, although movement was incremental. A more significant number could be your credit score, which helps determine the mortgage rates and costs actually offered to you.

Mortgage rates did not give a clear indication of their future direction this week. HSH Associates reports average combined rates for a 30-year FRM remained steady at 4.75 percent, while rates for a 15-year FRM moved up from 4.21 to 4.22 percent. Rates for a 5/1 ARM fell by 5 basis points from 3.72 to 3.67 percent.

Mortgage rates and credit scores: An important connection

Mortgage lenders typically approve mortgage loans (and their costs and terms) based on the borrower's creditworthiness. After being burned in recent years, mortgage lenders are wary of taking on high risk loans. The "magic number" for getting approved for a mortgage loan with favorable terms is a FICO score of 720. If your score is 720 or more, you'll most likely be able to get the mortgage you need as long as you meet other qualifying criteria. Borrowers with credit scores of less than 620 can expect problems finding mortgage loans.

Mortgage loans: Tips for improving your credit scores

Buying a home is a major financial decision, and it deserves appropriate planning. Following these tips can help you prepare for qualifying for a mortgage loan without paying premiums for questionable credit:

• Order and read your credit reports: You're entitled to one free copy of your credit report every year from each of the three major credit bureaus. Order your credit reports and purchase your credit scores. Read your credit reports carefully and verify that all information is correct. Contact the credit bureaus if your reports contain errors.
• Pay off credit card and consumer debt: This is the best way to improve your credit score. Eliminating debt also reduces your debt-to-income ratio, a number mortgage lenders use for approving mortgage loans.
• Save up for your down payment and closing costs: Your minimum down payment may be anywhere from 3 to 20 percent of the purchase price, depending on your mortgage loan. Mortgages made with down payments of less than 20 percent require mortgage insurance. The MI premiums are added to your monthly mortgage payments. The more you can put down toward your home purchase (or the more home equity you have for a refinance), the better your chances of finding a lower cost mortgage.

Mortgage lenders and real estate pros can help you find local and state resources for first time home buyers and can also assist with finding a mortgage loan matching your needs.

Our live database of current mortgage rates can help you find the best mortgage rates in your area.