Refinance Home Mortgage Rate

In today’s economy, good home mortgage refinance rates are quite low, approaching 5% or less if you have excellent credit. To be categorized as having excellent credit, your FICO (Fair Isaac Corporation) score needs to be between 750 and 850. The FICO score is a complex weighted calculation of someone’s creditworthiness, based on past and current financial activity. An average FICO score is 723 points, which is good.

This week in time, May 5, 2010, the average best home mortgage rate refinance interest rate is just below 5%, at 4.5%. It is a hair higher than the low 4.31% interest rates available for short term variable rate first mortgage loans. The interest rates will vary by loan product, refinancing term length and by the amount borrowed.

A person’s FICO score is important when they want to borrow money or get a good refinance home mortgage rate from most banks, credit unions or other government regulated financial institutions. The score itself is comprised of data found on the credit records that are kept current by Equifax, Trans Union and Experian credit reporting agencies. The score is divided into categories that have different weight, or importance. These include:

• Payment history – going back at least 7 years, includes on time, late or missed payments, how long past due, judgments, liens, bankruptcy (10 years) on record, collections, lawsuits
• Amounts owed – how many, how much, what percentage of available credit limit is used, high balance, high limits
• Length of credit history – how long account has been open, if it is open, last activity
• New credit – how many recently opened, recent inquiries, how long since previous adverse activity
• Types of credit used – credit accounts, retail accounts, mortgage, consumer loans, installment

About 65% of the total score is weighted on payment history and amounts owed. With a good FICO score above 660, the home loan mortgage rate on refinance loans is still very low, between 4.5% and 8.5%.

In addition to having a good to excellent FICO score, the requirements for good refinance home mortgage rates include other factors. Income, length of employment over two years in the same occupational field, down payment amount, previous history with that lender and the federal prime rate are just some of the more important things that will affect interest rates offered.

To get a good home loan mortgage rate on refinance products, take steps to improve your credit score. Do this by paying down balance due amounts to 30% or less of the available limits. Make sure every payment is on time. Pay off balances but keep the accounts open. Having open paid off accounts will lower your total debt owed to credit available ratio. Increase income to improve your debt to income ratio. Do not open new accounts, and do not allow anyone to run your credit report.

Take some time, several months, to increase your credit score. This can save you hundreds or thousands of dollars on home mortgage refinancing. A single FICO point can be the difference you need for a better interest rate.