Mortgage Rates Drop, but Credit is Still King

From CNN Money:

The takeover of Fannie and Freddie may make mortgage borrowing cheaper - but it won't make getting a loan any easier. Mortgage rates have plummeted, but that hasn't made getting a home loan any easier for most borrowers.

In the wake of the government's takeover of Fannie Mae and Freddie Mac last weekend, the 30-year fixed rate has dropped from 6.26% last Friday to 5.79%. But only buyers with a credit score of 740 of above - and a 20% down payment - can qualify for such a low rate. During the boom, borrowers only needed scores of 640 to land the lowest rates available. Even a 580 score would get them very close to the best rate.

During the credit crisis, Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) have become virtually the only source of funding for banks and other home lenders looking to make home loans. Their ability to lend is crucial to the housing market. To that end, the Treasury will buy mortgage-backed securities from the two firms, and lend them money if necessary, all in an effort to make credit more available to home buyers.

Click here for more.