On October 1, 2011 the federal government lowered the limit on conforming mortgages to $625,500 from $729,750. This reduction will only affect a small percentage of people buying homes. Currently there are only 250 counties throughout the United States and its territories that will see the change, limits in the remaining areas will remain the same at $417,000.

What does this mean for potential home buyers? It means that instead of being able to obtain a government backed mortgage, they will have to opt for a jumbo loan. The great news is jumbo loan rates are still very low, in some cases a mere.25 percentage points above a conventional loan.

For the best mortgage rates you will need a very good credit score. This especially applies to jumbo loan rates because lenders see these loans as a higher risk. It is always advisable to review your credit report and credit score at least two months before applying for a loan. This additional time will allow you to clean up any errors and raise your score prior to applying for a loan.

To receive the best mortgage rates, you will need to place 20% or more down on the property. You will also need to show that you have been employed continuously with the same employer for two or more years at the same pay rate or higher. You will also need to show that your mortgage payment will not exceed 35% of your monthly income.

Applicants for conventional or jumbo loans should shop around for the best rates. Lenders have changed so many of their requirements in the last few years that what qualifies for great rates at one bank will not at another.

Once you have established a good rate, request that it is locked in for at least 30 days. Some lenders are leery about doing this anymore, but interest continues to fall, and it is currently in their best interest to lock into the current rate. As of October 6, 2011, interest rates have dropped below 4%, which is the first time mortgage rates have been this low in 40 years. Economists, however, believe that lower rates are still possible.