Despite tightened lending standards to get a mortgage, homebuyers are still calling the shots. That's especially true if you don't have to worry about selling a house in a down market, you can come up with a 20 percent down payment, and you plan to live in the house for at least five years (time enough to recover your costs and wait for a rebound in home prices).

The average rate for a 30-year, fixed-rate mortgage was recently hovering around 6 percent. Borrowers with top-notch credit — a FICO score of 760 or higher — can expect the best deals on mortgages. Borrowers with a score of 720 or better will also be able to find bargains.

Don't expect to get 100 percent financing. Banks require at least 5 percent down — 10 percent in markets with declining home values, such as California, Florida and Nevada.

If you're in the market for a house, it's foolhardy to wait for a slightly better deal on mortgage rates. Thirty-year mortgages aren't closely tied to the short-term rates over which the Fed has the most control. What moves fixed-rate mortgages is a change in long-term interest rates, such as the rate on 10-year U.S. Treasury notes. Even if short-term rates continue to fall, Kiplinger's expects the yield on 10-year Treasuries (recently 3.6 percent) to rise to 4.0 percent by midyear. Homeowners who want to refinance, especially those who have a reset on an adjustable-rate loan looming, should also consider making a move soon.

But borrowers who want a jumbo mortgage, which is a home loan of more than $417,000, will have a tougher time finding deals. Jumbo-mortgage rates were recently 0.9 of a percentage point higher than rates on 30-year fixed mortgages of $417,000 or less. That's because Fannie Mae and Freddie Mac — government-sponsored agencies that purchase and package mortgages and issue them to investors in the form of bonds — weren't permitted to buy home loans issued for more than that amount.

The economic-stimulus package passed by Congress raises the limit to as high as $729,750 in expensive real-estate markets. Because banks can now repackage larger loans and sell them to Fannie Mae or Freddie Mac, they may begin to offer lower rates on some jumbo loans. That could cause rates to fall to the normal spread of 0.2 to 0.25 of a percentage point higher than the rate on smaller loans. But you'll have to act fast to lock in lower jumbo rates: The higher limits for Fannie Mae and Freddie Mac last only until Dec. 31.


Thomas M. Anderson is an associate editor at Kiplinger's Personal Finance magazine. Send your questions and comments to [email protected].