(MONEY Magazine) – With interest rates on mortgages and home-equity loans plummeting, this is the best time in four years to borrow money to buy or refinance a home. Unfortunately, however, banks are worried about rising default rates, so a number of consumers may find it more difficult to qualify for the inexpensive loans. To help revive the slumping U.S. economy, the Federal Reserve drove down interest rates from December through February. HSH Associates, a New Jersey financial publisher, reports that fixed-rate 30-year mortgages at 9% or less are available in 14 of the nation's 24 largest metropolitan areas. And, by its count, at least 200 lenders nationwide offer adjustable-rate mortgages with initial rates under 7%. Rates on home-equity loans (HELs) have never been lower. In most major cities, you can find an HEL at the prevailing prime rate -- currently 9% -- plus two to 2.5 points. But if you plan to pay back your loan in three years or less, you'd be better off taking a no-points HEL at 10.5% to 10.75%. Experts warn, however, that you may have to act swiftly to take full advantage of these low rates. Many economists predict rates will edge back up as early as this month in response to signs of economic recovery and persistent 4.5% inflation. Other factors to weigh: The qualification hurdle. While credit is cheap, getting the loan isn't necessarily easy. Paradoxically, at the same time that the Fed is encouraging banks to lend by lowering rates, other federal regulators, alarmed by the rising bank failures, are pressuring institutions to tighten their requirements. ''Unfortunately, a lot of creditworthy borrowers are having trouble getting loans because their lender is cutting back business,'' says Lyle Gramley, the chief economist of the Mortgage Bankers Association. Among other things, loan officers are scrutinizing such items as your income and credit history much more closely than they did in the 1980s, when they figured ever-rising real estate values would protect them against defaults. As of this month, for example, Freddie Mac and Fannie Mae, companies that package mortgages for resale to investors, will no longer buy loans made to home buyers whose incomes were not thoroughly verified by the original lender. Borrowers who worry about having a loan application rejected because of questions about their income or credit history can improve their chances of being approved by increasing their down payments -- provided they have the cash. The credit-card crunch. Despite painfully high credit-card rates of as much as 22%, Americans carry nearly a third of their nonmortgage debt on plastic -- in part because of the convenience. And although competition in this lucrative market is heating up (see ''Smart Moves to Make with Your Credit Cards'' on page 126), lenders are checking out customers carefully to stem rising delinquencies. Recently, for example, First Chicago, the nation's fourth largest issuer, with 6.6 million accounts, ran spot credit checks on its customers in the Northeast, where personal bankruptcies jumped 65% from 1989 to 1990. First Chicago then canceled more than 7,800 accounts. To protect yourself against having a card yanked, keep your monthly payments current. Also, Robert McKinley of RAM Research, a credit-card consulting firm in Frederick, Md., suggests that you cancel any plastic you don't really need. The reason: the potential debt represented by your cards -- even if it goes untapped -- can make you appear less creditworthy to a bank.

BOX: COMMON INDEXES FOR ARMs

One-year Treasury constant maturity 6.27% 11th District cost of funds 7.85 National mortgage contract rate 9.54

Note: Averages are for February, January and January, respectively. Source: HSH Associates. For the latest information on mortgage rates in your area, plus a kit that will help you select the right loan, call toll-free for MONEY Magazine's Mortgage Match at 800-243-8474. Cost: $29.95.

CHART: NOT AVAILABLE CREDIT: Bank Rate Monitor; 100 Highest Yields CAPTION: THE BEST SAVINGS YIELDS IN THE U.S.

CHART: NOT AVAILABLE CREDIT: HSH Associates CAPTION: LEADING RATES IN THE 24 LARGEST METRO AREAS

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